Home buyers…here is the First thing you should do

Homebuyer job No. 1: Check credit report

TALLAHASSEE, Fla. – Feb. 4, 2010 – Federal law allows Americans to obtain one free credit report annually from each of the three major credit reporting agencies. Anyone who needs a mortgage to buy a home should consider ordering the reports first – before they start a home search.

“People who got caught up in the hectic pace of holiday shopping may not have taken steps to protect their personal information,” says Florida Agriculture and Consumer Services Commissioner Charles Bronson. “Most credit card bills are now coming due, so it’s the perfect time to make sure there are no unauthorized charges on their accounts or other fraudulent activity that could impact their credit.”

It’s been nearly five years since a change was made to the Fair Credit Reporting Act that requires the credit reporting agencies to provide a free report to consumers who request one. The change was made to encourage consumers to identify potential identity theft quickly.

A credit report contains information about a consumer’s credit history, including a listing of all credit cards, loans, bill payment history and bankruptcies. Major consumer reporting agencies sell the information to credit card companies and other creditors, insurers, employers and businesses that review it when consumers apply for credit, insurance, loans and employment. A poor credit history can result in rejection of credit or higher interest rates on a loan or credit card.

Bronson recommends that people not get all three credit reports at once; they should space them out over twelve months as a way to monitor their credit throughout the year. The credit reporting agencies usually have similar information, so checking one report every three months would allow them to quickly spot mistakes or fraudulent activity.

The three major credit reporting agencies are Equifax, Experian and Trans Union. To obtain a free copy of reports from these agencies, go to: http://www.annualcreditreport.com/cra/index.jsp. Consumers can also order their reports by calling toll‐free 877‐322‐8228.

Important note: Many websites charge a fee for credit reports, and consumers should be wary.
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Reprinted by permission: © 2010 Florida Realtors®

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Your comments welcomed

Information Resource for Tax Credit Info

There is a lot of confusion about the tax credit buyers may qualify for after closing on their first or dream move-up home.

There are several places to go for information and buyers should only seek official websites (as opposed to official-looking).

The National Association of Realtors (an entity that is over 100 years old), has great information for consumers that answers the following questions and provides links to other sources like the IRS.

Visit: http://www.realtor.org/home_buyers_and_sellers/2009_first_time_home_buyer_tax_credit

Some of the FAQs explored are:

Who Qualifies for the Extended Credit?

Which Properties Are Eligible?

How Much Is Available?

How is a Buyer’s Credit Amount Determined?

If the Buyer(s)’ Income Exceeds These Limits, Can He/She Still Get a Credit?

Can a Buyer Still Qualify If He/She Closes After April 30, 2010?

Will the Tax Credit Need to Be Repaid?

Obviously, you should review this information and the information provided in the related links with the IRS so that when you sit with your tax preparer, you are not caught by surprise and more importantly, so that you are comfortable knowing whether your tax preparer is well versed on the subject.

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Your comments welcomed

Need help with closing costs? Fannie may have a way…

Fannie to offer closing cost aid on foreclosures

WASHINGTON – Feb. 1, 2010 – Fannie Mae, the largest provider of residential home funding in the United States, announced on Friday that it would start to pay closing costs for buyers of foreclosed homes in its inventory. Buyers of qualified properties will get up to 3.5 percent in closing costs or an equivalent amount for the purchase of new appliances.

Fannie wants to clear out the nearly 50,000 properties it has in inventory – listed on HomePath.com, the Web site created by Fannie Mae last year to sell the growing number of foreclosed homes. The offer is available to any owner-occupant who closes on the purchase of a property listed on HomePath.com before May 1, 2010. Applicable properties can be found on HomePath.com, along with property descriptions, photographs, community and school information, and more.

In addition, some Fannie Mae-owned properties are eligible for special HomePath Mortgage and HomePath Renovation Mortgage financing, which offers qualified homebuyers the ability to purchase with as little as 3 percent down.

“Attracting qualified buyers to the market and reducing inventory of vacant homes is critical to stabilizing neighborhoods and helping the market recover,” Terry Edwards, executive vice president for credit portfolio management, said in a statement.

Reprinted by permission: © 2010 Florida Realtors®

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your comments welcomed

Employment is key to our recovery in Florida – UF Study finds

UF: Fla. real estate stalled, future unclear

GAINESVILLE, Fla. – Jan. 28, 2010 – Uncertainty continues to influence Florida’s real estate outlook in the latest University of Florida (UF) quarterly survey, with fears that stagnant financial markets, rising unemployment and another round of foreclosures could make things worse in 2010.

“Our respondents report that we will continue to see increasing vacancies and decreasing rents throughout most property types,” says Timothy Becker, director of UF’s Bergstrom Center for Real Estate Studies. “One person summed up the current situation by saying that ‘unemployed people don’t need office space, don’t shop, don’t pay rent and don’t buy houses.’”

Adding to the angst is the unavailability of financing, Becker says. Respondents continue to worry about their ability to refinance existing mortgages coming due, even if they are able to meet the obligations right now, he said.

Many adjustable rate mortgages taken out five to seven years ago soon reset, which compounds the problem in the housing market as it increases monthly payments and throws some property owners into financial peril.

“I think we’re going to see more foreclosures coming down the line because of that and because of the rising joblessness,” Becker says. “The longer people are out of work, the less opportunity they have to make payments on their house.”

Florida’s unemployment rate climbed to 11.8 percent in December, its highest level since 1975, and there are concerns that it may rise even higher. “Until we start seeing significant job gains, it’s going to be a rough road to hoe for residential and commercial properties,” Becker says.

Mortgage refinancing also stands to increase the number of foreclosures in commercial real estate, the weakest sector of the market.

“Many commercial property owners can still pay their mortgage based on the rents they collect, but with the terms of their mortgages ending, they will have to figure out how to get financing, and there is no financing out there,” Becker says. “With values continuing to decline, the amount of money that banks would be willing to offer if they did finance is considerably less than what is owed on the mortgage.”

On the positive side, the survey indicates that private investors both foreign and domestic, are starting to “kick the tires” in many markets. In addition, investor expectation for returns is starting to fall to more realistic levels, helping to close the spread between bidding and asking prices.

“These developments bode well for the transaction market when quality properties start coming to the marketplace,” Becker says. “Unfortunately, there are few good quality deals to bid on.”

One trend found in the survey is a growing marketplace of larger national companies that have taken over small regional and local firms. Because the bigger companies are in a better position to get financing to acquire property, they are more positive about the outlook for their own business than are neighborhood “mom and pop” firms” or companies concentrated solely in Florida.

Apartments are the only sector with funding readily available for ownership transfer, as a direct result of the willingness of Fannie Mae, Freddie Mac and Housing and Urban Development to provide financing for such properties, Becker says.

Apartments continue to be the strongest segment of the market, with expectations for dramatic occupancy increases as people continue to lose their homes. “Because foreclosures have had such an adverse effect on homeownership and people have to live somewhere, there is no shortage of folks in the market to rent,” he says.

Until the backlog of housing foreclosures has been reduced, the outlook for prices for new single-family homes is pessimistic, Becker says. Respondents expect prices to rise at a rate slower than inflation or to remain at present levels in the near future.

“I think it’s going to be a ‘wait and see what happens’ type of year, but problems with unemployment and financing will continue to weigh us down,” he says.

The Sunshine State’s unhealthy real estate picture places it in the company of such problem-prone states as Nevada and California, with their high foreclosure rates. “Florida is still competing with the top of the worst and it’s likely to stay that way,” Becker says.

The quarterly survey of Florida professional real estate analysts and investors is conducted on an ongoing basis. The recent survey of 319 participants covers 13 urban regions of the state and up to 15 property types.

Reprinted with permission: © 2010 Florida Realtors®

Policy Changes of FHA will affect first-time buyers starting February-2k10

The federal government is pitching the new proposed changes for FHA as “…Policy Changes to Address Risk and Strengthen Finances”. They add: “New Measures Will Help FHA Better Manage Risk, While Maintaining Support for the Housing Market and Access for Underserved Communities”, but will it?

The proposed FHA changes can be found in a HUD press release HERE. In summary, some of the changes will be as follows:

QUOTE

Announced FHA Policy Changes:

1. Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending
   • The first step will be to raise the up-front MIP by 50 bps to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge.
   • If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP.
   • This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing
   • The initial up-front increase is included in a Mortgagee Letter to be released tomorrow, January 21st, and will go into effect in the spring.
2. Update the combination of FICO scores and down payments for new borrowers.
   • New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.
   • This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well.
   • This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.
3. Reduce allowable seller concessions from 6% to 3%
   • The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.
   • This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.
4. Increase enforcement on FHA lenders
   • Publicly report lender performance rankings to complement currently available Neighborhood Watch data – Will be available on the HUD website on February 1.
     • This is an operational change to make information more user-friendly and hold lenders more accountable; it does not require new regulatory action as Neighborhood Watch data is currently publicly available.
   • Enhance monitoring of lender performance and compliance with FHA guidelines and standards.
     • Implement Credit Watch termination through lender underwriting ID in addition to originating ID.
     • This change is included in a Mortgagee Letter to be released tomorrow, January 21st, and is effective immediately.
   • Implement statutory authority through regulation of section 256 of the National Housing Act to enforce indemnification provisions for lenders using delegated insuring process
     • Specifications of this change will be posted in March, and after a notice and comment period, would go into effect in early summer.
   • HUD is pursuing legislative authority to increase enforcement on FHA lenders. Specific authority includes:
     • Amendment of section 256 of the National Housing Act to apply indemnification provisions to all Direct Endorsement lenders. This would require all approved mortgagees to assume liability for all of the loans that they originate and underwrite
     • Legislative authority permitting HUD maximum flexibility to establish separate “areas” for purposes of review and termination under the Credit Watch initiative. This would provide authority to withdraw originating and underwriting approval for a lender nationwide on the basis of the performance of its regional branches

UNQUOTE

Although all the above policies are well-intended, the unintended consequence of them is that fewer buyers will qualify for the program and the level of sales will probably drop. First-time buyers today need as much help as ever to buy, and these rules will reduce the number of buyers.

Yet, we all know that people aren’t entitled to homeownership, though they have the right to pursue it. With these rules, better qualified people need only apply.

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Your comments welcomed

More details on coming FHA rule changes

FHA announces policy changes

WASHINGTON – Jan. 21, 2010 – Federal Housing Administration (FHA) Commissioner David Stevens yesterday outlined the new set of policy changes created to strengthen FHA’s capital reserves.

The FHA proposed the following steps: increase the mortgage insurance premium (MIP); update the combination of FICO scores and down payments for new borrowers; reduce seller concessions to three percent from six percent; and implement a series of measures to increase lender enforcement. U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan previewed the changes in December of last year, noting that the FHA would announce additional details before the end of January.

Announced FHA policy changes:

1. The mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending

• The first step is to raise the upfront MIP by 50 bps to 2.25 percent and request legislative authority to increase the maximum annual MIP that FHA can charge.
• If this authority is granted, the second step is to shift some of the premium increase from the up-front MIP to the annual MIP.
• This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing.
• The initial upfront increase is included in a Mortgagee Letter to be released today, Jan. 21, and will go into effect in the spring.

2. Update the combination of FICO scores and downpayments for new borrowers.

• New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5 percent downpayment program. New borrowers with less than a 580 FICO score will be required to put down at least 10 percent.
• This change will be posted in the Federal Register in February and, after a notice and comment period, go into effect in the early summer.

3. Reduce allowable seller concessions from 6 percent to 3 percent

• FHA says the current level exposes the FHA to excess risk by creating incentives to inflate appraised value.
• This change will be posted in the Federal Register in February, and after a notice and comment period, go into effect in the early summer.

4. Increase enforcement on FHA lenders

• Publicly report lender performance rankings to complement currently available Neighborhood Watch data will be on HUD’s website on Feb. 1. This is an operational change to make information user-friendly and hold lenders more accountable; it does not require new regulatory action as Neighborhood Watch data is currently publicly available.
• Enhance monitoring of lender performance and compliance with FHA guidelines and standards.
• Implement statutory authority through regulation of section 256 of the National Housing Act to enforce indemnification provisions for lenders using delegated insuring process.
• HUD is pursuing legislative authority to increase enforcement on FHA lenders.

In addition to these changes, FHA says it will continue to review its overall response to housing market conditions, and continuing to evaluate its mortgage insurance underwriting standards.
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Reprinted by permission: © 2010 Florida Realtors®

HUD laxes 90-day rule for buyers of REO property

HUD takes action to speed resale of foreclosed properties to new owners

WASHINGTON – Jan. 18, 2010 – In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan announced a temporary policy that will expand access to FHA mortgage insurance to allow for a quicker resale of 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.

“As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers,” says Donovan. “FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization.”

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

“This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed,” Donovan says.

Acquiring, rehabilitating and reselling foreclosed properties to prospective homeowners often takes less than 90 days in today’s market; and FHA’s 90-day rule can adversely impact buyers if a seller is unwilling to hold a property 90 days thanks to holding costs and the risk of vandalism.

“FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties,” says FHA Commissioner David H. Stevens. “This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity.”

The waiver will take effect on Feb. 1, 2010, and be effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of “flipping,” the waiver is limited to those sales meeting the following general conditions:

• 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.

• Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD’s website: http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf
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Reprinted by permission: © 2010 Florida Realtors®

The Year in Review – A Summary of Real Estate Matters In Miami-Dade County for 2009

The numbers are just churning off the virtual presses. Inventory levels throughout the county were down 35% between December, 2008 and December 2009 (down 3.2% from November to December, 2009), while closed sales were up 19.5% (up 4.1%), respectively.

Take a look at the following few charts…

The bottom line…although 2009 was a gloomy year for many, mainly due to unemployment concerns, the Obama Administration’s Tax Credit program has paid off.

Something else that has paid off is that some modifications are finally beginning to happen. I’m finally beginning to hear clients tell me that their modifications are going through and that they’re saving a lot of money.

For now, both these programs alone have helped tapper inventory levels and improve sales throughout the county.

However, the tax credit program expires in a few months (properties must be under contract by April 30th, 2010 and close by June to qualify).  For the moment, the question then remains, what will happen after the program expires? Will sales drop off like car sales did after the cash-for-clunkers program expired, or will the momentum be enough to sustain continued support?

One thing is for certain, business was probably better than many expected throughout the county.

However, there is still a disconnect between the Average List Price and Average Sold Price, even though the Median Price in the county has leveled off at around $160,000 (see below charts).

Chart2

The difference between the Average Active (List) Price and Average Sold Price is very possibly indicating that buyers are bargain hunting, and that higher priced properties are still sitting on the market unsold.

This is critical for sellers. Unless you are a lender looking to rid yourself of your REO inventory at fire-sale prices or a homeowner in distressed looking to sell your property in a short sale in order to avoid foreclosure, you are likely a seller in the upper price range (a softer segment of our market), or you are just overpriced and not likely to sell until you adjust your expectations and firmly compete with the bargain-priced properties available for sale in your building or neighborhood.

The Median Price proves that buyers are bargain-hunting. In addition, the Months of Inventory and Absorption Rates for Closed and Pending Sales reflect the rate at which inventory is finally moving county-wide as follows:

Chart3

In essence…it looks like this:

Date	12/08	11/09	12/09
Months of Inventory based on Closed Sales	26.0	15.2	14.1
Months of Inventory based on Pended Sales	23.6	10.9	10.1
Absorption Rate based on Closed Sales	3.9	6.6	7.1
Absorption Rate based on Pended Sales	4.2	9.2	9.9

Chart4

As improved as it is, we’re still a ways off. Until the employment numbers improve, the healthcare issues are resolved, loan modifications and short sales are streamlined and lenders go through the incredible amount of inventory in their books, plus we overcome the challenges predicted for 2010 and 2011 with the increased numbers of under-water mortgages experts expect to see, we may still be 3-5 years away from true “normal” – whatever that looks like when all this is over.

Surely, interest rates will not remain this low for too much longer, and neither will prices. Therefore, buyers planning to enjoy home ownership will likely need to make sure they have plans to stay put for at least 5+ years, before properties purchased today begin to pay off.

If you are an investor, it is more likely in this market for you to see a positive cash flow however. Warning – rent rates are also under pressure due to increased vacancies caused by the excess inventory many builders still hold, plus the empty units wanna-be investors  (who purchased several units during the boom thinking this would be their ticket to financial freedom), still hold or are being taken back in foreclosure and being sold and flooding the market.

This is why first-time buyers are reining in these days. These are the knights in shinning armor coming to rescue our housing market. However, these are locals with limited earning capacity who can not afford the upper level priced properties and have been consuming the lower priced properties once sold for tens, even hundreds of thousands more just 3 years ago.

Sellers who are still holding on to dear life thinking the market will turn around soon and they’ll soon get that selling price they’re holding on to, need to consider that if they cannot wait at least 3-5 more years before they see some semblance of that magic number, they need to either get serious and sell now before things get worse (even if prices begin to stabilize soon – if they’re struggling to make those payments and they’re one car or medical problem away from financial disaster), they are well advised to contact a professional and seriously listen to what they have to say about selling in this market.

In my next blog post I’ll provide a similar analysis of the areas i our county holding the highest concentration of condos – zip codes 33131, 33139 and 33140. Until then…may 2010 prove all the experts wrong and pleasantly surprise us.

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Your comments welcomed

Date	12/08	11/09	12/09
Months of Inventory based on Closed Sales	26.0	15.2	14.1
Months of Inventory based on Pended Sales	23.6	10.9	10.1
Absorption Rate based on Closed Sales	3.9	6.6	7.1
Absorption Rate based on Pended Sales	4.2	9.2	9.9

New Rules for Speedy Short Sales

According to an article recently posted in the Sun-Sentinel in Broward county, Florida and written by Paul Owers titled: Short sale rules could speed lender decisions, there are a number of new rules being forced on to lenders and investors alike to help speed up the short sale process.  Among them:

• lenders will have a 10-day limit to respond to offers
• sellers to receive $1,500 moving allowances
• the sellers will not be on the hook for repayment of any debt
• lenders will get $1,000 to cover administrative and processing costs
• investors owning the mortgages will receive a maximum $1,000 for allowing up to $3,000 in short sale proceeds to be distributed to less senior lenders

These are welcomed rules.

“The rules do not specifically apply to loans guaranteed by Fannie Mae or Freddie Mac, which represent about half of all U.S. mortgage debt. The two government-run mortgage companies are working to finalize their own guidelines.” according to the article in the Sun-Sentinel. “The Treasury plan…must be implemented by lenders no later than April (2010).”

Even when presenting lenders with great offers, the bureaucracy behind the approval of a short sale and blame-game pointing to insurers and investors behind the loans for the long delays is really getting old.

Buyers therefore find themselves scrambling to find the right property and hitting a wall at each turn. If they pursue REO listings, they find themselves competing with cash buyers/investors and lenders giving these buyers the preference.

First-time buyers are bid-ed out of this market for the most part.

When they then turn to short sales, the lack of communication and unnecessary delays wears them down. Some opt for making offers on multiple properties in the hope that one of them will stick. In the end, many just call it quits leaving agents, lenders and everyone up the line hanging with weeks and months of work for not.

Lastly, many non-distressed sellers own homes in less then perfect condition and expect top dollar for their property, making them off-limits for buyers (particularly, first-time buyers), who would then have to make updates, upgrades or repairs to these properties using an FHA-203k or Homepath loan.

If the purchase price is not low enough, these buyers are unable to buy the property and justify all the repairs for a final price that falls well above the after-repair value of the home in today’s market.

The government also needs to consider that all the new rules in place for GFEs, FHA and others, plus the elimination of the tax credit may actually create a similar effect as the cash4clunkers did. A dead stop in sales.

In addition, skeptics find that 2nd mortgage holders balking at the mere $3,000 they’re expected to take on their outstanding notes may still continue to stifle these efforts if their concerns are not addressed.

Overall, although something certainly must be done to help the housing market and reduce the number of foreclosures we would continue to see in 2010 and 2011 as the result of resetting option-arm loans and other fancy products that will also help stabilize prices so that additional “strategic” foreclosures are avoided from sellers just figuring it is cheaper to just walk away.

We’ll have to see if the government can actually get all parties to agree to a compromise and mitigate further damage to our already fragile economy through true programs like these and job creation.

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Your comments welcomed

Pool repairs require a license

Pool repairs require a license

TALLAHASSEE, Fla. – Jan. 7, 2010 – When building, renovating or repairing a swimming pool in Florida, homeowners must use a licensed contractor. It’s illegal to hire an unlicensed contractor, and a contract with one is not enforceable under law; that means owners have no legal recourse if they do not fulfill the agreement. In addition, unlicensed individuals may not be insured, with homeowners insurance forced to pay any work injuries.

Getting a pool license requires a background check, experience and/or education, and insurance. Certain core courses and a number of elective courses must be taken every two years to renew a license. If owners have a problem, they can file a complaint against the contractor’s license. A pool contractor’s license number can be checked at http://www.myflorida.org/dbpr.

Swimming pool/spa contractors are licensed in one of three different categories:

• Commercial pool/spa contractor: The scope of work involves, but is not limited to, the construction, repair and servicing of any swimming pool, hot tub or spa, whether public or private, regardless of use.

• Residential pool/spa contractor: The work involves, but is not limited to, the construction, repair and servicing of any residential swimming pool, or hot tub or spa.

• Swimming pool/spa servicing contractor: The work involves, but is not limited to, the repair and servicing of any swimming pool, hot tub or spa, whether public or private.

Any of the licenses include the ability to service a pool, along with other pool service certifications (i.e. Certified Pool Operator – CPO). However, those certified and not licensed cannot do any repairs.

To find a licensed pool professional by zip code, visit the Florida Pool Association’s website at: http://www.floridapoolpro.com/find_pool_pro/locator.asp.
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Reprinted by permission: © 2010 Florida Realtors®