7 Things All Borrowers Should Know About FHA Loans
July 7th, 2010 Categories: Real Estate Tools
FHA Pros, LLC, a national FHA condo approval service, has developed a list of facts speaking to the top misconceptions associated with FHA loans in order to help home buyers better navigate an already confusing market. FHA loans are mortgages issued by qualified lenders and insured by the Federal Housing Administration (FHA).
“We have seen home buyer interest in FHA loans go from practically zero three years ago to upwards of 87% today,” said Christopher Gardner, founder and president of FHA Pros, LLC. “Despite this rapid rise in popularity, many buyers still do not fully understand the benefits of these loans, and we believe it’s time to change that.”
1. FHA loans are not only for lower-income borrowers. FHA loans are available to everyone. There is no maximum income restriction associated with FHA loans, but borrowers do need to substantiate income and assets by submitting proper documentation. This requirement ensures that borrowers are well-vetted and truly able to afford their future homes.
2. FHA loans are not only for first-time buyers. Many people believe FHA loans are available only to first-time home buyers, but this is not the case. Whether borrowers are making their first home purchase or their fifth, they can look to FHA loans as a home financing option.
3. FHA loans are not just small loans; in fact, loan amounts can be as high as almost $800,000. The government recently raised the maximum loan amount from its original cap of $362,790 to $793,750 as a way to help stabilize the housing market. The amount a buyer can borrow varies from county to county though. Later this summer, condo buyers interested in FHA loans can visit www.checkfhaapproval.com to instantly identify FHA-approved condo associations and review maximum loan amounts for a given location.
4. FHA loans are not affiliated with the section 8 housing program. While both programs are administered by the U.S. Department of Housing and Urban Development (HUD), FHA loans have nothing to do with low-income subsidized housing. FHA loans are simply mortgages insured by FHA. This insurance provided by the federal government allows lenders to lend more freely by assuring them that they will be repaid in the event of default. Most traditional lenders, including Wells Fargo & Co., JP Morgan Chase and Citigroup are able to provide FHA loans to their customers.
5. FHA loans are often more affordable than conventional loans. While FHA loans typically offer the same interest rates as other loans, borrowers benefit from a much lower down payment of as low as 3.5%.
6. FHA-approved condo developments are more desirable to buyers. With 87% of home buyers indicating that they plan to use FHA loans, condo associations that are not FHA approved are missing out on a significant pool of prospective buyers. Under rules in place since February 2010, an entire condominium development must now apply to HUD and be granted FHA approval before a buyer can purchase a unit in an association with an FHA loan or before an existing unit owner can refinance into an FHA loan.
Due to the general unwillingness of today’s lenders to extend credit with respect to conventional loans, many borrowers find that FHA is their best bet. Lenders don’t mind lending when the federal government (FHA) assures them of repayment.
Homeowners associations (HOAs) should note that although FHA-insured mortgages might be easier to obtain, they are not “risky” loans, due in large part to the strict “full documentation” requirements placed on borrowers. Individual buyers or sellers can initiate the approval process or current owners can encourage their HOA to apply.
7. FHA loans are assumable. In addition to lower down-payment and credit-qualifying requirements as compared to conventional loans, FHA loans are assumable. This means that when a seller with an FHA loan sells his or her property, the loan and its financing terms (interest rate) can be transferred to the new buyer. This unique feature will certainly make a property more valuable in times of rising interest rates.
“Now, more than ever, buyers and sellers need to understand the options available to them when it comes time to buy a home,” continued Gardner. “At FHA Pros we have worked with countless HOAs, attorneys and individuals to easily and efficiently navigate the historically tricky FHA-approval process.”
From RIS Media
Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.
Search Luxury Homes in Los Angeles at Valerie Fitzgerald Real Estate Listings
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New Modern Beach Residences Now Open in Marina Del Rey
June 30th, 2010 Categories: Buying a Home
Los Angeles-based SunBrook Partners announce Valerie Fitzgerald as the exclusive sales agent for their new beach community development Latitude 33 which opened officially on Wednesday, June 16.Located in Marina Del Rey at 330 Washington Blvd, Latitude 33 is a collection of 122 homes three blocks from Venice Pier starting in the low $600s. The community is made up of luxury condominiums, town-homes and high-rise flats. The top three floors of the building are exclusively penthouse units.
“This is a long awaited debut for this amazing and culturally-expanding community,” says Valerie Fitzgerald. “This project offers contemporary beach living with traditional Southern California lifestyle.”
A modern beach-inspired community combining Los Angeles’ high-style attitude with the unique and eclectic flavors of the locale, Latitude 33 offers flats and townhomes in three distinctive yet complementary lifestyle collections: the SKY Collection, BOARDWALK Collection and BEACH Collection. Latitude 33 combines an inviting atmosphere with a unique coastal backdrop, perfect for enjoying the ultimate California lifestyle.
A West Los Angeles veteran representing high-profile new construction projects, Fitzgerald knows what it takes to promote and sell high-end real estate developments from the construction phase to roll out. Fitzgerald most recently oversaw sales at The Carlyle Residences (The Elad Group of New York’s Plaza Hotel), a 24-story, 76-unit tower rising on the Wilshire Corridor. In 2005 she lead sales at The Century, as well as at The Hollywood in 2009.
Latitude 33 offers residences ranging $600,000 to $2,400,000. Residences include designer-selected wood flooring in entry and throughout main living areas dramatic floor-to-ceiling windows and private balconies with glass rails. Kitchens have modern Italian cabinetry featuring clean lines of Bon Tempi or Gato design, elegant granite countertops, professional quality Wolf stainless steel built in appliances, Sub Zero refrigerators and wine coolers, Grohe stainless steel faucets and Kohler stainless steel sinks.
Valerie Fitzgerald has more than 20 years real estate experience and one of Coldwell Banker’s top producers nationwide. She was recently named one of The Wall Street Journal’s top agents and is president of The Valerie Fitzgerald Group in Beverly Hills, CA. Author of Heart and Sold: How to Survive and Build a Recession-Proof Business (Simon and Schuster), and is a regular contributor to real estate trade publications. For more information, visit: http://valeriefitzgerald.com.
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U.S. Home Prices Rose a Better Than Expected 3.8% in April
June 29th, 2010 Categories: Real Estate Tools
Conditions in the U.S. housing sector improved a bit more than expected in April, as home prices in 20 major cities rose 3.8% on a year-over-year basis, according to the S&P/Case-Shiller U.S. National Home Price survey. They rose 2.4% year-over-year in March.
Home prices in the 20-city index also rose 0.8% from March to April — the first month-to-month increase in half a year, Case-Shiller said.
Economists surveyed by Bloomberg had expected home prices to rise 3.5% in April on a year-over-year basis.
Meanwhile, the S&P/Case Shiller 10-city index rose 4.6%, on a year-over-year basis, and 0.7% from March to April.
David M. Blitzer, chairman of the Index Committee at Standard & Poor’s, said that although the April data indicated improvement in the housing sector, the gains were enhanced by the expiration of the home buyer tax credit in April, and were not as broad-based as one could wish for.
Gains Were Concentrated in California
“Home price levels remain close to the April 2009 lows set by the S&P/Case Shiller 10- and 20-City Composite series. The April 2010 data for all 20 MSAs [metropolitan statistical areas] and the two composites do show some improvement with higher annual increases than in March’s report. However, many of the gains are modest and somewhat concentrated in California,” Blitzer said, in a statement. “Moreover, nine of the 20 cities reached new lows at some time since the beginning of this year. The month-over-month figures were driven by the end of the federal home buyer tax credit program on April 30.”
Year-over-year percentage price changes in some major U.S. cities included: New York, down 1%, Chicago, down 1.6%, Boston, up 4.9%, Washington, D.C., up 7.3%, Atlanta, up 0.2%, Tampa, down 2.4%, Miami, down 0.5%, Dallas, up 3.3%, Denver, up 4.4%, Los Angeles, up 7.8%, San Francisco, up 18%, and Seattle, down 2.8%.
Overall, April’s home price report represents only a small victory for the U.S. housing sector. The 3.8% year-over-year gain and the 0.8% rise in April are positive developments, but economists generally agree that the now-lapsed home buyer tax credit likely boosted sales and prices. If demand is not strong enough to support prices without the support of the tax credit program, home prices could retrench in May or June.
For now, the modestly positive numbers in April report are a signal that the negative wealth effect may be dissipating — but it will take two or three more months of data before economists and real estate agents can predict whether the U.S. housing sector will continue to recover.
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10 Ways to Make Your House Worth More
June 18th, 2010 Categories: Real Estate Tools
Kendra Todd, host of My House Is Worth What?, tells you how to set your home apart and get the maximum price for your property.
Liven Up the Landscaping
Not only does good landscaping give you the highest return on your money, but it also can literally transform the exterior look and feel of your home. Hire a landscaper to do the job, or do it yourself for some old-fashioned sweat equity. Either way, be sure to turn your front yard into a colorful, floral oasis.
Enhance Your Exterior Entryway
Make your front door the centerpiece of your home’s curb appeal. Repaint it a striking, tasteful color, or sand it down and stain it for an antique, weathered look. Finish the look with updated lights, potted plants on either side of the door and a new, high-end knocker and handle.
Have a Welcoming Walkway
The front walkway is essential to drawing the buyer in the door, so it’s got to pop. You’ll get points with buyers for installing a high-end material such as brick pavers. If your pathway is curved, accentuate the movement by lining it with lights or flowering plants.
Freshen the Foyer
What do people see first when they enter your home? Consider that the foyer is the first impression of your home’s interior, so make sure it doesn’t block the line of sight to any marketable rooms or views. Remove bulky furniture, paint it a neutral color, upgrade the lighting, and have fun with things like high-end entry tile or even marble flooring.
Light It Up Right
The right lighting can make a small home appear larger or a dark home seem sunny and cheery. The wrong lighting can make your home feel dark and dreary. Installing brighter, modern light fixtures not only highlights your home’s best features, but the right style of fixtures can also create a more current look.
Neutralize With Paint
Paint color is a personal choice, and potential buyers will probably want to customize it for themselves when they move in, but that’s no reason not to paint when selling. You are out to showcase your home in its best light, right? Don’t fall into the “white or beige” trap, but also avoid rich, dark colors as those don’t appeal to everyone. Think about richer colors with wider appeal, and don’t forget to focus on the details: window and door trim, baseboards and crown molding.
Update Fixtures, Hardware
Avoid major kitchen and bathroom overhauls if you are ready to sell. Instead, highlight the existing good features by tackling small tasks such as updating the lighting and installing new faucets, nozzles, mirrors and cabinet doorknobs. You’ll be surprised how big an impression these small, relatively inexpensive updates will make.
Repaint Cabinets
Replacing or even refinishing cabinets can be costly and therefore risky if you dump a ton of money into your place right before you sell. A quicker and less expensive way to recoup your costs and still modernize your home is to repaint the cabinets. It’s incredible to see how a coat of paint can transform the entire look of your kitchen or bath.
Don’t Forget the Flooring
Flooring has one of the most dramatic effects on the size and appeal of your home, and you get a great boost in value if you choose the right materials. If you have worn, stained carpet or vinyl flooring, rip it up quickly and replace it with tasteful tile, wood laminate, or, if your market allows, nice hardwood floors.
Create a Backyard Oasis
What do buyer’s see when they walk out back? A vacant slab of concrete? A rarely used covered pool? Transform your backyard into an entertaining space, so the buyer can visualize all the good times they’ll have out there with neighbors and family. Buy some inexpensive patio furniture, a grill and some potted plants to fill extra space and tie it all together. Install some outdoor lighting as the finishing touch. By the time you’re done, you’ll wonder why you didn’t do it sooner.
Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.
Search Luxury Homes in Los Angeles at Valerie Fitzgerald Real Estate Listings
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Valerie Fitzgerald Discusses Tips for Achieving Success in This Economy
June 3rd, 2010 Categories: Video Posts
In an interview with Better TV, Valerie talks about the importance in finding creative solutions to business and personal challenges.
“When you start being creative things start transforming in your business, personal and physical worlds and the process gets you on the right path,” says Valerie.
Three Tips for Achieving Success in This Economy…
1. Be Consistent.
2. Prioritize Your Lists.
3. Organize and Create Support Systems.
For more tips on how to reinvent your life check out Valerie’s book Heart and Sold: How to Survive and Build a Recession-Proof Business at Amazon.com.
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The State Of The World’s Real Estate Markets
June 1st, 2010 Categories: Buying a Home
In an interview on The Creating Wealth Show, Matthew Montagu-Pollock, the head of Global Property Guide, discussed his observations of the current state of the world’s real estate markets. From Australia to South America, he outlines what investors should be paying attention to in order to formulate smart investment strategies. From www.nuwireinvestor.com.
Australia and New Zealand Real Estate
Matthew launches this guided investment tour in Australia and New Zealand where favorable lending rates have helped markets buck the latest downward trend. Unfortunately, rates suppressed in the interest of economic recovery inevitably rise, and prices haven’t fallen far enough to warrant “a happy investor strategy.” As with much of the world’s property market, Matthew recommends delaying entry 3 – 4 years. The longer, slower cycles that distinguish real estate from the stock market ’s sharp swings provide time to exercise caution instead of a headlong rush.
Developing vs. Developed Markets
Mortgage financing is a relatively recent concept in much of the world, where historically inaccessible lending has kept prices low. The notion that developed markets are inherently less risky was disproved with the latest collapse. In fact, developing markets often offer greater opportunity, including high rental yields which are a key indicator of opportunity for appreciation.
Asia Real Estate Markets
Prospects for investors in Asia are as diverse as the region itself. The more structurally sound markets are on the verge of a bubble. Authorities in Hong Kong and Singapore are ready to clamp down on lending and raise interest rates. Unfettered construction and soaring prices have left China’s market in danger of over-heating while the drop in gross rental yields from 10% to less than half that is a troubling sign. In contrast, Japanese officials are restricting development; rental yields are just average, and the stagnant market is nearly impenetrable to foreign investors. In Asia’s developing markets, political instability is disquieting to investors, especially in Thailand. The 12% rental return in Indonesia and the Philippines is deceptive because taxes erode up to a quarter of investments. Overall, Asian market policies favor landlords, while Australia is neutral.
Eastern Europe Real Estate
Patience is the best investment strategy for Russia and Eastern Europe, where the collapse of Baltic states has led to price declines of 60%. Matthew advises waiting 5 years at minimum to allow time for economic stability to be restored, despite the lure of bargain property. The outlook for Hungary and Poland is more promising, with rental yields at 8% and 6% respectively. The forecast for the rest of Europe is more dismal. Because the strength of real estate is inextricably tied to the broader economy, investors should rule out Ireland, Spain and Italy where GDP growth is abysmal. Germany and Belgium can’t be recommended because foreign investors bear a heavy tax burden, while prices in the UK are peaking and favorable interest rates won’t last forever.
Middle East Real Estate
Dubai’s collapse has put it in the spotlight, but investors should have been forewarned by a precipitous drop in rental yields two years earlier. Elsewhere in the Middle East, political instability detracts from price appreciation in Jordan and Lebanon. Cairo in Egypt is an example of why Matthew is bullish on capital cities since they furnish a pool of expatriate tenants. Exotic Morocco and tranquil Tunisia also possess potential.
South America Real Estate
South America holds promise for investment, especially in Uruguay and Brazil. Rent returns in Sao Paolo are 7%, and the Brazilian government has set a course for growth. Despite its reputation, Colombia shines with its rich history, and rent returns are favorable in Lima, Peru.
North America Real Estate
The guided investment tour ends in North America, which Matthew predicts will be ripe for investment within 18 months since this market has nearly cycled through the latest crisis. Although Canada wasn’t impacted as severely as the US, its pro-tenant policies are a deterrent to investing.
Matthew ends the interview with encouragement for investors, praising real estate as a source of security in confusing financial times, providing a tangible asset and steady income especially for investors who adopt a hands-on approach.
This article is based on Episode 166 of Jason Hartman’s Creating Wealth Show. You can listen to the full podcast at JasonHartman.com, a real estate investment and wealth creation site.
Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.
Buy or Sell You Luxury Homes in Westside Los Angeles at Valerie Fitzgerald Real Estate Listings
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Refi madness: Surge continues as rates edge lower still
May 27th, 2010 Categories: Buying a Home
With mortgage rates near record lows, homeowners are applying to refinance their loans at the highest rate in seven months, the Mortgage Bankers Assn. said Wednesday.
The volume of refinancings jumped 17% last week as the average contract rate for a 30-year fixed mortgage sank to 4.80% from 4.83% a week earlier, the mortgage trade group said. It was the highest volume since October, according to the group’s weekly report on home loan applications.
Refinance applications had begun to surge two weeks earlier as global investors worried about the European debt crisis fled to the perceived safety of U.S. Treasury securities. That drove down the yield on Treasuries and mortgage rates followed, as they generally do.
Although the latest surge is powerful, it doesn’t compare with the tidal wave of refinancings that took place after December 2008, when the Federal Reserve, battling the fierce recession, first lowered its benchmark interest rate to nearly zero.
That burst of replacement home lending continued as rates bumped lower until September 2009, when 30-year fixed-rate loans dropped below the 5% threshold for the first time in decades, recalled Stew Larsen, head of mortgage banking for Bank of the West.
There are still plenty of homeowners with higher-rate loans who have never refinanced despite several opportunities since then to lock in rates starting with a 4, he said.
“Many of our customers now feel they missed a couple of other windows,” Larsen said.
In contrast to the latest refinance boom, applications to purchase homes fell further after a sharp decline the week before. The refinance share of mortgage activity was at 72% of total applications, up from 68% the previous week and the highest refinance in the survey since December 2009.
Industry observers said any home purchasers who could do so completed their transactions by the end of April, when federal tax credits expired for people buying houses.
It will be worth watching to see if purchase lending picks up again without the federal stimulus to spur sales.
– E. Scott Reckard
Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.
Buy or Sell You Luxury Homes in Westside Los Angeles at Valerie Fitzgerald Real Estate Listings
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Optimistic Outlook for Housing, But Challenges Remain
May 25th, 2010 Categories: Real Estate Tools
Economists participating in a recent NAHB Construction Forecast Conference Webinar agreed that the housing market is on the road to recovery, but cautioned that several factors could contribute to a bumpy ride in the coming months.
“Home buyer tax credits clearly did their job and got people back into the marketplace,” said NAHB Chief Economist David Crowe, who also served as moderator of the webinar.
With the expiration of the tax credits in April, Crowe said the housing momentum is being carried forward by low interest rates, pent up household formations, stabilizing prices and budding employment growth.
However, many factors continue to drag on housing at this time–including the critical shortage of credit for new and existing projects, competition from short sales and foreclosures and regional economic disparities.
The availability of acquisition, development and construction (AD&C) financing remains a major concern as the industry moves forward, Crowe said. “Builders still tell us that credit is extremely tight. Banks are saying not so much. That gap is an indication that something is broken, at least when it comes to residential construction.”
NAHB is forecasting 552,000 single-family starts in 2010, up 25% from last year’s 445,000 level, which was the lowest annual output since 1959 when the government began collecting this data.
Suffering from an acute shortage of available financing and a significant shadow inventory of homes lost to foreclosure that are competing against normal inventory, Crowe said that multifamily housing starts are expected to lose further ground this year, falling 18% to 93,000 units, before rebounding to 150,000 units in 2011.
Crowe anticipates that nationwide home prices will remain flat this year and post a modest increase in 2011 and that mortgage interest rates will continue to stay low, barely breaking 6% by the end of this year, and not rising much above that level through 2011.
The road back to normal levels of residential construction will be longer for some states than others. By the end of 2011, the top 20% of the states will see their production levels back to normal. Those states include Texas, Oklahoma, Montana, Wyoming, Tennessee, Louisiana, Mississippi, Alabama, Arkansas and Kansas. The previous boom markets in California, Arizona, Florida and Nevada, along with the Great Lake states of Michigan, Indiana, Ohio, Illinois and Wisconsin that were hit by deep cuts in auto production and manufacturing, will be the last ones to recover.
Housing Demand Reflects Job Growth
Like his co-panelists, Mark Zandi, chief economist of Moody’s Analytics, said that housing will improve as the job market does. He forecast that the economy will average monthly job gains of 125,000 this year, 250,000 in 2011 and 300,000 in 2012.
Mirroring anticipated employment growth, Zandi expects GDP to rise 3% this year, approximately 4% in 2011 and closer to 5% in 2012.
The key factor driving housing demand is jobs, said Zandi. “We’re not going to get home sales unless we have jobs. Here the prospect is good. Business balance sheets are in good shape and improving rapidly. These are pre-conditions for better job growth and we should see the job market steadily gain traction.”
Zandi forecast that overall housing starts will total 700,000 units this year, close to 1 million in 2011 and about 1.7 million by 2012, which he describes as close to trend and consistent with demographics in a normal functioning economy.
Driven largely by the high foreclosure rate, Zandi expects that home prices will continue to fall modestly in 2010, down about 5% on a national average. He calculates that the difference between supply and demand is approximately 750,000 units annually, and it will require until the end of 2011 to work off this extra inventory.
“The good news,” he said, is “as the job market improves, so will household formations and demand. So I anticipate we will work off the excess inventory more quickly than the two-year period.”
He added that most of the housing surplus is regionally concentrated in Florida, around Atlanta, along the South Carolina coast, in Las Vegas, Phoenix, and Tucson and in the central valley of California.
Consumers Fuel Recovery
Taking the most bullish approach to the ongoing recovery, Chris Varvares, president of Macroeconomic Advisers, LLC, forecast that GDP will rise 3.7% this year and that housing starts will total 750,000, well above the Blue Chip Economic Indicators consensus of 690,000.
“Personal consumption expenditures are making a very solid recovery,” said Varvares. “Residential investment is going from a drag to a contributor. The difference between our forecast and the consensus is the strength in personal consumption and housing.”
Although the huge number of foreclosures on the market are accounting for about 300,000 to 400,000 fewer starts than there otherwise would be, Varvares said the fundamentals still point to a solid trajectory for housing.
“With prices stabilizing, demand is picking up and we expect builders to respond. By the end of 2011, we expect about 1.2 million housing starts. This suggests we can have recovery in starts this strong while simultaneously working down excess housing inventory.”
The panelists were in unanimous agreement on a number of areas–the Federal Reserve will likely continue to keep interest rates near rock bottom levels at least through the end of the year; the chance of a double dip recession is extremely slim; and policymakers will need to take action within the next two years to increase revenues and cut spending to rein in the burgeoning structural deficit.
For more information, visit www.nahb.org.
Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.
Search Luxury Homes in Los Angeles at Valerie Fitzgerald Real Estate Listings
Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.
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Permanent Mortgage Modifications Up in April 2010
May 19th, 2010 Categories: Buying a Home
The Obama administration recently announced that its program to prevent foreclosures has continued to make slow but steady progress, with the number of homeowners who have received permanently modified mortgages up about 13% in April 2010.The 295,348 permanent modifications amount to about a quarter of the 1.2 million trial modifications started under the program, which began last year.
During the trial, banks and mortgage servicers reduced a homeowner’s monthly payment for 90 days, with a median reduction of about $500. If the homeowner made the payments and submitted additional paperwork, the servicer made the modification permanent and became eligible for cash incentives from the government.
The Los Angeles-Orange County area now accounts for the most active trial and permanent modifications under the Home Affordable Modification Program, with 57,758, or 6.2% of the total, nudging past the New York City area.
Search Luxury Homes in Los Angeles at Valerie Fitzgerald Real Estate Listings
Servicers have canceled a total of 277,640 trial modifications through April, according to the Treasury Department. That was up sharply from the 155,173 modifications that had been canceled through March. In addition, 3,744 people have had their permanent modifications canceled.
The increased cancellations largely were caused by many servicers granting temporary modifications without verifying the homeowners’ income. Starting June 1, 2010, the program will require all modifications be made based on verified income statements, Treasury officials said.
The $75 billion program has been criticized for moving too slowly to modify loans to create lower payments for 3-4 million people by the end of 2012. In December, the Obama administration began pushing mortgage services to move more quickly to convert eligible trial modifications to permanent ones.
Since then, the number of permanent modifications has nearly tripled. Large servicers such as Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc., which had been lagging behind smaller firms, have improved their performance.
Those large companies account for more than half of the active trial and permanent modifications. Still, they have turned only about 25% of their temporary modifications into permanent ones, compared with 50% or higher for some other lenders, such as GMAC and U.S. Bancorp.
Many homeowners and housing advocates have complained about bureaucratic runarounds by mortgage servicers in trying to get their mortgages modified. Treasury officials said they planned to collect new data about the performance of companies and release it beginning in July.
“The number of homeowners receiving significant relief through a mortgage modification continues to rise,” said Phyllis Caldwell, head of the Treasury’s Homeownership Preservation Office. “Our focus now is on improving the homeowner experience and holding servicers accountable for their performance.”
The new data will focus on the eight largest mortgage servicers. It will include the average time from the start of a trial modification to a permanent modification, how long it takes servicers to answer phone calls from homeowners and the time it takes them to respond to homeowner problems that come from housing counselors, attorneys and other third parties.
(c) 2010, Los Angeles Times.
Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.
Search Luxury Homes in Los Angeles at Valerie Fitzgerald Real Estate Listings
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Lenders ordering second, last-minute credit report before closing mortgages
May 18th, 2010 Categories: Buying a Home
Changes taking effect June 1 are part of Fannie Mae’s ‘loan quality initiative’ to cut down on slipshod underwriting and fraud by borrowers.
If you’re thinking about applying for a home mortgage this year, here’s some important news: Beginning June 1, your lender is likely to order a second full credit screening immediately before closing.
The last-minute credit report will be designed to find out whether you’ve obtained — or even shopped for — new debt between the date of your loan application and the closing. If you’ve made applications for credit of any type — for furnishings and appliances for the new house, a car, landscaping, a home equity line, a new credit card — the closing could be put on hold pending additional research by the lender.
If you’ve taken out new loans that are sizable enough to affect the debt-to-income ratio calculations used in your original mortgage approval, the deal could fall through. The added debt load could render you ineligible for the mortgage because you suddenly appear unable to handle the payments without a strain on your household budget.
The June 1 changes are part of a new effort by mortgage giant Fannie Mae to cut down on slipshod underwriting by lenders and frauds by borrowers. Fannie’s so-called “loan quality initiative” will require lenders not only to pull two credit reports for each mortgage transaction but to perform additional verifications of borrower occupancy plans for the property, Social Security numbers and Individual Taxpayer Identification Numbers, among other changes.
“There’s an almost irresistible urge” for many mortgage borrowers to spend, said Don Unger, chief executive of Advantage Credit Inc. of Evergreen, Colo. “The lender says, ‘OK, you’re approved for the loan,’ and you immediately think about shopping for all the things you need for the house.”
Borrowers may go to a retailer and put in a credit application. In the past, that might not have raised an eyebrow, or even been detected. But under the new double-check policy, when the application shows up as a “hard” or borrower-initiated inquiry on a credit report, Unger said, the lender is going to have to contact the merchant and determine whether credit was extended, in what amount and how this might affect the applicant’s home-financing transaction.
Marc Savitt, president of the National Assn. of Independent Housing Professionals and a mortgage broker in Martinsburg, W.Va., says it’s not an uncommon scenario. “Most often the new debt involves furniture or other goods for the house,” Savitt said. “However, we have seen debt for new cars and other major purchases.”
Terry Clemans, executive director of the National Credit Reporting Assn., recalls one case where home buyers “went out and gorged on $40,000 worth of new furniture and all types of stuff” after their loan approval — resulting in monthly payments far beyond what they could afford. Under the new policy, they’d probably be shot down before closing.
Fannie Mae spokesperson Janis Smith said lenders “will have to look for things like new credit accounts, increased credit lines, increased balances on existing accounts, undisclosed or newly recorded liens, second mortgages — anything that may have changed since initial application that might impact a borrower’s debt-to-income ratio.”
As a practical matter, some lenders are likely to ask their credit-reporting vendors to perform the investigations when new debts or inquiries pop up on borrowers’ files. Fannie Mae’s instructions say that “lenders must determine that all debts of the borrower incurred or closed up to and concurrent with the closing” are considered in the final loan analysis.
Unger, however, said all this may not be as straightforward as it sounds. For example, if the credit report is pulled immediately before closing to comply with the “up to and concurrent” requirement, there may not be sufficient time to check out inquiries — especially those where no actual drawdown of debt has been reported to the national credit bureaus. He also questioned whether entire loan packages might need to be re-underwritten — a time-consuming process — based on credit data discovered at the 11th hour.
How should home buyers and refinancers prepare for the new credit-check procedures? Lenders and credit reporting company executives say everybody needs to follow just one basic rule: abstinence. Between your application for a mortgage and the date of closing — which might be a span of 45 to 60 days or more — resist spending.
And don’t apply for new credit unless you discuss it in advance with your lender and get a green light.
Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.
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