Friday, January 22, 2010
Thursday, January 21, 2010
FHA Changes Announced
In October 2009, FHA announced that its capital reserve fund had fallen below the congressionally mandated level of 2 percent. The drop in capital reserves has led Congress and the Administration to call for changes to strengthen FHA.
On January 20, 2010, FHA announced major changes to ensure its long-term financial soundness. FHA is trying to balance three fundamental objectives: 1) financial soundness of the FHA insurance fund – ensuring that its capital ratio returns above 2 percent, 2) fulfilling its mission of serving borrowers not adequately served by the private sector and 3) facilitating the recovery of the housing industry and the over-all economy.
NAR has met with the Commissioner on several occasions to discuss the state of the housing market and to underscore FHA’s invaluable role. By all accounts the new changes are a victory for home buyers. FHA has carefully balanced the need to make financial reforms with the need to keep FHA available to a large segment of consumers. This is evident by retaining the 3.5 percent minimum down payment requirement and allowing the up-front mortgage insurance premium to be financed.
FHA announced changes in the following areas:
· The upfront mortgage insurance premium (UFMIP) will increase to 2.25 percent up from 1.75 percent. Contrary to reports, FHA will continue to allow the financing of the UFMIP.
· Borrowers with a credit score below 580 will be required to have at least a 10 percent down payment. The minimum down payment will remain at 3.5 percent for all other borrowers.
· FHA will seek legislative authority to increase the annual premium (currently capped at .55 percent). Over time, increasing the annual premium may allow FHA to reduce the up-front premium.
· Seller concessions will be reduced to 3 percent from 6 percent.
FHA will make the following lender enforcement changes:
· FHA will implement credit watch terminations at lender underwriting.
· Public reporting of lender performance through scorecard system will be implemented.
· FHA will implement, through notice and comment, indemnification against lenders. Indemnification will be expanded beyond fraud and misrepresentation.
· FHA will seek legislative authority to enforce indemnifications against direct endorsed (DE) lenders.
· FHA will seek legislative authority to sanction lenders nationwide based on performance of local branch.
· FHA is an integral part to the continued recovery of the real estate industry and the overall economy. NAR will continue to work with FHA, the Administration, and the Congress to ensure FHA can fulfill its mission while providing for the safety and soundness of the insurance fund. NAR is committed to assisting FHA as they balance risk management with creating homeownership opportunities across the country.
On January 20, 2010, FHA announced major changes to ensure its long-term financial soundness. FHA is trying to balance three fundamental objectives: 1) financial soundness of the FHA insurance fund – ensuring that its capital ratio returns above 2 percent, 2) fulfilling its mission of serving borrowers not adequately served by the private sector and 3) facilitating the recovery of the housing industry and the over-all economy.
NAR has met with the Commissioner on several occasions to discuss the state of the housing market and to underscore FHA’s invaluable role. By all accounts the new changes are a victory for home buyers. FHA has carefully balanced the need to make financial reforms with the need to keep FHA available to a large segment of consumers. This is evident by retaining the 3.5 percent minimum down payment requirement and allowing the up-front mortgage insurance premium to be financed.
FHA announced changes in the following areas:
· The upfront mortgage insurance premium (UFMIP) will increase to 2.25 percent up from 1.75 percent. Contrary to reports, FHA will continue to allow the financing of the UFMIP.
· Borrowers with a credit score below 580 will be required to have at least a 10 percent down payment. The minimum down payment will remain at 3.5 percent for all other borrowers.
· FHA will seek legislative authority to increase the annual premium (currently capped at .55 percent). Over time, increasing the annual premium may allow FHA to reduce the up-front premium.
· Seller concessions will be reduced to 3 percent from 6 percent.
FHA will make the following lender enforcement changes:
· FHA will implement credit watch terminations at lender underwriting.
· Public reporting of lender performance through scorecard system will be implemented.
· FHA will implement, through notice and comment, indemnification against lenders. Indemnification will be expanded beyond fraud and misrepresentation.
· FHA will seek legislative authority to enforce indemnifications against direct endorsed (DE) lenders.
· FHA will seek legislative authority to sanction lenders nationwide based on performance of local branch.
· FHA is an integral part to the continued recovery of the real estate industry and the overall economy. NAR will continue to work with FHA, the Administration, and the Congress to ensure FHA can fulfill its mission while providing for the safety and soundness of the insurance fund. NAR is committed to assisting FHA as they balance risk management with creating homeownership opportunities across the country.
Monday, January 18, 2010
What's Next for the Treasure Valley Real Estate Market
NAR just released their 3rd qtr numbers for our area. True...the third qtr was a long time ago, but there's still real value in the "Local Trend" data attached to the report.
Its interesting to overlay sales and price trends from the 3rd qtr to the actual of what happened in the fourth:
"Prices are down and continue to weaken" - but, we had a strong rebound in median driven by shrinking inventory and a continuation of the tax credit
"Sales growth has improved substantially form a year ago" - and continued through year end
"Employment continues to decline and could impact demand in some areas" - recent good news from Micron
Mortgage Payment to Income - "Historically strong and an improvement over 2nd qtr
"Local affordability has improved and is below historical average"
Read the entire report
Its interesting to overlay sales and price trends from the 3rd qtr to the actual of what happened in the fourth:
"Prices are down and continue to weaken" - but, we had a strong rebound in median driven by shrinking inventory and a continuation of the tax credit
"Sales growth has improved substantially form a year ago" - and continued through year end
"Employment continues to decline and could impact demand in some areas" - recent good news from Micron
Mortgage Payment to Income - "Historically strong and an improvement over 2nd qtr
"Local affordability has improved and is below historical average"
Read the entire report
Friday, January 15, 2010
FHA Will Announce Changes Next Week
In October 2009, FHA announced that its capital reserve fund had fallen below the congressionally mandated level of 2 percent. The drop in capital reserves has led Congress and the Administration to call for changes to strengthen FHA.
The week of January 18, 2010, FHA will announce major changes to ensure its long-term financial soundness. FHA is trying to balance three fundamental objectives: 1) financial soundness – ensuring that its capital ratio returns above 2 percent, 2) fulfilling its mission of serving borrowers not adequately served by the private sector and 3) facilitating the recovery of the housing industry and the over-all economy.
NAR has met with the Commissioner on several occasions to discuss the state of the housing market and to underscore FHA’s invaluable role. In looking for solutions to FHA’s financial concerns, replenishing the insurance fund and lowering loan-to-value ratios have the most significant impact on the FHA’s actuarial soundness. We expect changes in the following areas:
Improve FHA loan quality:
Increasing “upfront cash” that a borrower has to bring to the table by:
Eliminating the ability to finance the upfront premium
Increase the cash investment required above 3.5 percent by:
o Reduce seller concessions from 6 percent to as low as 3 percent
o Impose a minimum FICO score
Down payment requirement will remain at 3.5 percent
Impose a loan-to-value (LTV) maximum ratio by FICO score
Increase the Mortgage Insurance Premiums:
FHA can increase the MIP as follows:
Up-front premium may be raised to 2-2.25 percent, up from 1.75 percent
Higher premiums may be introduced for certain FHA products (such as refinance transactions)
FHA Lender Eligibility Changes
FHA is requiring significant changes for lenders. Many changes recommended were published as a proposed rule on lender eligibility changes in late November. Final rule has not yet been published. There are several proposed changes for FHA lenders:
Elimination of loan correspondent approval process
Increase net worth requirements of lenders to $2.5 million over the next 3 years
Lenders will be required to have a net worth of $1 million within one year, of which 20 percent must be liquid assets
Implementation of Credit Watch for underwriting lenders to monitor defaults and claims
Codification of Mortgagee Letter 2009-31, which places additional requirements on FHA lenders
Risk Management Improvements
FHA will be overhauling its approach to risk management throughout 2010. FHA will likely begin targeting early payment defaults for reviews and loans that result in claims in the first couple of years.
Risk Management Improvements (Continued) This change will likely increase indemnification requests since FHA will be targeting their reviews on early payment defaults (i.e. loans with potential problems).
FHA will be highlighting “poor performing” lenders more prominently on their website and in press releases. This started in January when FHA and the HUD Inspector General announced subpoenas to 15 mortgage companies demanding data and documentation on failed loans.
The Commissioner has frequently discussed the development of a Lender Scorecard, which is expected in the near future.
FHA Budget Proposals (Requires Legislation) As part of the Administration’s FY 2011 budget proposal there will be several FHA legislative initiatives. They could include:
Increase the current cap for annual premiums, currently at .55 percent (FHA has said that raising the annual premium is the “most effective means of raising capital for the fund w/ least impact per borrower”)
Obtain a legislative change to Credit Watch to facilitate the suspension of an FHA lender’s entire operation not just individual branches
Increased accountability of FHA lenders for fraud or misrepresentation
These changes will require congressional action, the timetable for enacting and implementing any legislation is subject to the Congressional schedule.
Conclusion
FHA will be transformed over the next few years. The changes outlined above are the beginning of the process with additional changes expected during the tenure of FHA Commissioner Dave Stevens. Going forward, FHA will continually evaluate programmatic changes and will likely withdraw them when the capital ratio returns above 2 percent. However, it is unlikely FHA will relax risk management and lender monitoring enhancements.
http://www.realtor.org/government_affairs/fha_resources
The week of January 18, 2010, FHA will announce major changes to ensure its long-term financial soundness. FHA is trying to balance three fundamental objectives: 1) financial soundness – ensuring that its capital ratio returns above 2 percent, 2) fulfilling its mission of serving borrowers not adequately served by the private sector and 3) facilitating the recovery of the housing industry and the over-all economy.
NAR has met with the Commissioner on several occasions to discuss the state of the housing market and to underscore FHA’s invaluable role. In looking for solutions to FHA’s financial concerns, replenishing the insurance fund and lowering loan-to-value ratios have the most significant impact on the FHA’s actuarial soundness. We expect changes in the following areas:
Improve FHA loan quality:
Increasing “upfront cash” that a borrower has to bring to the table by:
Eliminating the ability to finance the upfront premium
Increase the cash investment required above 3.5 percent by:
o Reduce seller concessions from 6 percent to as low as 3 percent
o Impose a minimum FICO score
Down payment requirement will remain at 3.5 percent
Impose a loan-to-value (LTV) maximum ratio by FICO score
Increase the Mortgage Insurance Premiums:
FHA can increase the MIP as follows:
Up-front premium may be raised to 2-2.25 percent, up from 1.75 percent
Higher premiums may be introduced for certain FHA products (such as refinance transactions)
FHA Lender Eligibility Changes
FHA is requiring significant changes for lenders. Many changes recommended were published as a proposed rule on lender eligibility changes in late November. Final rule has not yet been published. There are several proposed changes for FHA lenders:
Elimination of loan correspondent approval process
Increase net worth requirements of lenders to $2.5 million over the next 3 years
Lenders will be required to have a net worth of $1 million within one year, of which 20 percent must be liquid assets
Implementation of Credit Watch for underwriting lenders to monitor defaults and claims
Codification of Mortgagee Letter 2009-31, which places additional requirements on FHA lenders
Risk Management Improvements
FHA will be overhauling its approach to risk management throughout 2010. FHA will likely begin targeting early payment defaults for reviews and loans that result in claims in the first couple of years.
Risk Management Improvements (Continued) This change will likely increase indemnification requests since FHA will be targeting their reviews on early payment defaults (i.e. loans with potential problems).
FHA will be highlighting “poor performing” lenders more prominently on their website and in press releases. This started in January when FHA and the HUD Inspector General announced subpoenas to 15 mortgage companies demanding data and documentation on failed loans.
The Commissioner has frequently discussed the development of a Lender Scorecard, which is expected in the near future.
FHA Budget Proposals (Requires Legislation) As part of the Administration’s FY 2011 budget proposal there will be several FHA legislative initiatives. They could include:
Increase the current cap for annual premiums, currently at .55 percent (FHA has said that raising the annual premium is the “most effective means of raising capital for the fund w/ least impact per borrower”)
Obtain a legislative change to Credit Watch to facilitate the suspension of an FHA lender’s entire operation not just individual branches
Increased accountability of FHA lenders for fraud or misrepresentation
These changes will require congressional action, the timetable for enacting and implementing any legislation is subject to the Congressional schedule.
Conclusion
FHA will be transformed over the next few years. The changes outlined above are the beginning of the process with additional changes expected during the tenure of FHA Commissioner Dave Stevens. Going forward, FHA will continually evaluate programmatic changes and will likely withdraw them when the capital ratio returns above 2 percent. However, it is unlikely FHA will relax risk management and lender monitoring enhancements.
http://www.realtor.org/government_affairs/fha_resources
Monday, January 11, 2010
ACAR Legislative Lobby
Today the Idaho Legislature convenes for the 2010 legislative session. Governor Otter presented his State of the State speech which outlined a no-growth budget for next year, the same revenue figure as last year calling for no salary increases for state employees; and spending all but $32.8 million of the state’s reserve funds by the end of fiscal year 2011.
The theme of the legislature will be the budget. With a major budget shortfall sales tax exemptions are looked to for sources of revenue, and we will defend your hard earned commissions vigorously. We will also face new fees that ultimately increase the cost of housing at a time when costs have become much more affordable. We will face new regulations that harm future development. We will promote issues that benefit the economy of the state and attract new business to Idaho in the future.
One of the primary roles of the REALTOR® Associations is to protect the real estate industry from undue burden and further issues important to REALTORS®. As one of the most prominent lobbyist organizations in Idaho and the country, we work against poorly designed small business and real estate issues and legislation and create new laws to promote quality of life and the industry.
Special thanks to all of you who invested in RPAC during the dues renewals, the money is critical in keeping our voice strong. We will be at the Capitol to ensure the voice of the real estate industry is heard.
The theme of the legislature will be the budget. With a major budget shortfall sales tax exemptions are looked to for sources of revenue, and we will defend your hard earned commissions vigorously. We will also face new fees that ultimately increase the cost of housing at a time when costs have become much more affordable. We will face new regulations that harm future development. We will promote issues that benefit the economy of the state and attract new business to Idaho in the future.
One of the primary roles of the REALTOR® Associations is to protect the real estate industry from undue burden and further issues important to REALTORS®. As one of the most prominent lobbyist organizations in Idaho and the country, we work against poorly designed small business and real estate issues and legislation and create new laws to promote quality of life and the industry.
Special thanks to all of you who invested in RPAC during the dues renewals, the money is critical in keeping our voice strong. We will be at the Capitol to ensure the voice of the real estate industry is heard.
December...at Last
To paraphrase Mark Twain…“December. This is one of the peculiarly dangerous months to speculate in housing in. The others are July, January, September, April, November, May, March, June, October, August, and February.”
Last week we read from NAR that pending homes sales were slowing. It was with some trepidation that I opened the IMLS Stats page this morning…boy was I relieved.
December sales were up 24% compared to December ’08. Total sales for 2009 were 5,558 compared to 5,144 in ’08. Overall we increased sales by 8% year-over-year.
Total homes sold in December were 378; compared to 277 in December ‘08. What a difference 12 months and a Home Buyer Tax Credit makes!
Typically sales in December lessen as the year nears end. The volatility in the housing market for the last four years makes it hard to “average the change from November to December. In December ’08, we exceeded November (but November was our worst ever month). In ’07 the December sales were off 23% from November. In ’06 the change was -10%.
December '09 sales were 32% down from October.
Pending sales in December were off only 7% from November. Not the big dip experienced nationally.
First time home buyers continue to drive our market. The announcement of the Tax Credit extension and its expansion to include current homeowners should enable us to continue to move in the positive direction. 48% of homes sold in November were <$160,000. At the same time, inventory in this price range is the lowest it’s been all year.
Median home price jumped up 4% from November to $165,000. For all of 2008, median dropped 9% (comparing January to December).
Inventory fell 6% from November to 3,428 units.
On the less positive side... distressed properties continue to hurt our friends and family. Among all active listings, 49% are either short sales, in foreclosure or REO's. 54% of all November sales were also distressed. As of today, 63% of all pending sales are also distressed.
It wouldn’t be an overstatement to say that without the Home Buyer Tax credit, we wouldn’t be where we are today. And, where we are is in a “very fragile” recovery. This morning’s business report said that our unemployment went up slightly in December; and that thousands more Idahoans had stopped looking for work.
We continue to see “suggestions” that employment in the Valley might be getting incrementally better. Small to medium size employers are making the news for their successes. Our own Micron appears to have reversed the slide they’ve endured over the last 20 months.
No matter the anecdotes, we need our elected officials to work more closely with our Boise Valley Economic Partnership to find creative incentives to bring more jobs to our Valley.
Last week we read from NAR that pending homes sales were slowing. It was with some trepidation that I opened the IMLS Stats page this morning…boy was I relieved.
December sales were up 24% compared to December ’08. Total sales for 2009 were 5,558 compared to 5,144 in ’08. Overall we increased sales by 8% year-over-year.
Total homes sold in December were 378; compared to 277 in December ‘08. What a difference 12 months and a Home Buyer Tax Credit makes!
Typically sales in December lessen as the year nears end. The volatility in the housing market for the last four years makes it hard to “average the change from November to December. In December ’08, we exceeded November (but November was our worst ever month). In ’07 the December sales were off 23% from November. In ’06 the change was -10%.
December '09 sales were 32% down from October.
Pending sales in December were off only 7% from November. Not the big dip experienced nationally.
First time home buyers continue to drive our market. The announcement of the Tax Credit extension and its expansion to include current homeowners should enable us to continue to move in the positive direction. 48% of homes sold in November were <$160,000. At the same time, inventory in this price range is the lowest it’s been all year.
Median home price jumped up 4% from November to $165,000. For all of 2008, median dropped 9% (comparing January to December).
Inventory fell 6% from November to 3,428 units.
On the less positive side... distressed properties continue to hurt our friends and family. Among all active listings, 49% are either short sales, in foreclosure or REO's. 54% of all November sales were also distressed. As of today, 63% of all pending sales are also distressed.
It wouldn’t be an overstatement to say that without the Home Buyer Tax credit, we wouldn’t be where we are today. And, where we are is in a “very fragile” recovery. This morning’s business report said that our unemployment went up slightly in December; and that thousands more Idahoans had stopped looking for work.
We continue to see “suggestions” that employment in the Valley might be getting incrementally better. Small to medium size employers are making the news for their successes. Our own Micron appears to have reversed the slide they’ve endured over the last 20 months.
No matter the anecdotes, we need our elected officials to work more closely with our Boise Valley Economic Partnership to find creative incentives to bring more jobs to our Valley.
Thursday, January 7, 2010
Quenching the Thirst for Knowledge
The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn. --Alvin Toffler
As we begin preparations for 201o, the ACAR Education Committee began with the question: What do our members need to know to be more professional and better able to do their jobs?
This is not an easy question and there is no "right" answer. Education is critical to success in this industry as rules, regulations, and even the market change at a head spinning rate. If you can't keep up, you'll be left behind.
So, we began our discussion... what is the path most likely to lead to success? Is it knowledge on short sales? Is it knowledge about the basics of real estate? Is it about getting back to the service side of the industry?
We wanted to ask you, our members, what education do you want most? What can we do to start you on the path?
Drop us a line and let us know... you can comment below or email me.
Susan Hansen
Staff Liaison for the ACAR Education Committee
As we begin preparations for 201o, the ACAR Education Committee began with the question: What do our members need to know to be more professional and better able to do their jobs?
This is not an easy question and there is no "right" answer. Education is critical to success in this industry as rules, regulations, and even the market change at a head spinning rate. If you can't keep up, you'll be left behind.
So, we began our discussion... what is the path most likely to lead to success? Is it knowledge on short sales? Is it knowledge about the basics of real estate? Is it about getting back to the service side of the industry?
We wanted to ask you, our members, what education do you want most? What can we do to start you on the path?
Drop us a line and let us know... you can comment below or email me.
Susan Hansen
Staff Liaison for the ACAR Education Committee
Monday, January 4, 2010
U.S. Loan Program May Have Made Things Worse
Experts: $75 billion effort to fight foreclosures has hurt some homeowners
by: Peter S. Goodman
New York Times
Jan. 1, 2010
The Obama administration's $75 billion program to protect homeowners from foreclosure has been widely pronounced a disappointment, and some economists and real estate experts now contend it has done more harm than good.
Since President Obama announced the program in February, it has lowered mortgage payments on a trial basis for hundreds of thousands of people but has largely failed to provide permanent relief. Critics increasingly argue that the program "Making Home Affordable", has raised false hopes among people who simply cannot afford their homes.
As a result, desperate homeowners have sent payments to banks in an often-futile efforts to keep their homes, which come see as wasting dollars they could have saved in preparation for moving to cheaper rental residences. Some borrowers have seen their credit tarnished while falsely assuming that loan modifications involved no negative reports to credit agencies.
Read the rest of the article
by: Peter S. Goodman
New York Times
Jan. 1, 2010
The Obama administration's $75 billion program to protect homeowners from foreclosure has been widely pronounced a disappointment, and some economists and real estate experts now contend it has done more harm than good.
Since President Obama announced the program in February, it has lowered mortgage payments on a trial basis for hundreds of thousands of people but has largely failed to provide permanent relief. Critics increasingly argue that the program "Making Home Affordable", has raised false hopes among people who simply cannot afford their homes.
As a result, desperate homeowners have sent payments to banks in an often-futile efforts to keep their homes, which come see as wasting dollars they could have saved in preparation for moving to cheaper rental residences. Some borrowers have seen their credit tarnished while falsely assuming that loan modifications involved no negative reports to credit agencies.
Read the rest of the article
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