WASHINGTON - Fannie Mae plans to raise minimum credit score requirements next month and limit the amount of overall debt that borrowers can carry relative to their incomes, The Washington Post reported on Thursday.
Starting December 12, the automated system that the government-controlled mortgage finance company uses to approve loans will reject borrowers who have at least a 20 percent down payment but whose credit scores fall below 620 out of 850, the newspaper reported. Previously, the cut-off was 580.
Also, for borrowers with a 20 percent down payment, no more than 45 percent of their gross monthly income can go toward paying debts, the newspaper said.
A Fannie Mae spokesman told the newspaper that the limits reflect the company's recent experience.
Loans to people with credit scores below 620 fell seriously behind at a rate approximately nine times higher than other loans purchased in the same period, Fannie Mae spokesman Brian Faith said. Loans taken out by borrowers with lots of debt also suffer higher levels of serious delinquency, he said.
"It's not enough to help borrowers buy a home -- we must also ensure that they can stay in the home over the long term," Faith said in a statement to The Washington Post.
Monday, November 30, 2009
Friday, November 27, 2009
Home prices climb for 2nd straight quarter
NEW YORK (CNNMoney.com) -- Home prices rose for the second consecutive quarter but remained nearly 9% lower than a year earlier, according to a housing market report issued Tuesday.
Prices nationwide rose 3.1% in the three months ended Sept. 30, according to the S&P/Case-Shiller Home Price Index, a closely watched gauge of housing market direction. That followed a similar 3.1% rise during the second quarter of the year.
Prices were still below a year ago, however, down 8.9% compared with the third quarter of 2008. Nevertheless, that's an improvement from the double-digit price decreases the index had been reporting; the second quarter year-over-year decline was 14.7%. Prices had dropped 19% year-over-year during the first quarter of 2009.
We have seen broad improvement in home prices for most of the past six months," says David Blitzer, Chairman of the Index Committee at Standard & Poor's.
The Case-Shiller 20-City Composite index posted its fifth monthly increase in a row in September, rising 0.3% from August levels.
The worst performing market continued to be Las Vegas, where prices have dropped for 37 consecutive months. They're now 55.4% off their highs.
Midwestern cities staged a comeback in September, with Minneapolis and Detroit prices each gaining 1.8%, the most of any of the 20-cities covered. Chicago prices jumped 1.2%; San Francisco climbed 1.3%; and Los Angeles and Phoenix both rose 0.8%.
Stopping the home price slide is an important factor in any economic recovery. Falling prices increase the number of "underwater" homeowners, those who owe more on their mortgage balances than their homes are worth.
Underwater mortgage borrowers are much more likely to lose their homes to foreclosure. Indeed, it's a crucial factor in whether people lose their homes or not, as Mark Goldman, a San Diego State University real estate professor pointed out.
"If they have a home worth $300,000 and they owe $250,000 and can't pay their mortgage, they'll just sell the house," he said.
It's when they have a house worth $200,000 and they owe $250,000 that these people default, because the sale of the house would not pay their whole debt.
A report from First American CoreLogic released Tuesday, revealed that nearly a quarter of all mortgage borrowers are underwater. That, as well as the ongoing foreclosure problem, has contributed to doubt about the staying power of the recent price trend.
"I think it's temporary," said Pat Newport, a real estate analyst with IHS Global Insight. "I can't see home prices stabilizing as long as we have that problem."
According to Newport, foreclosures could worsen over the next several months as many toxic loans go through resets, making them much less affordable for their borrowers.
A significant contributor to the improvements in the housing markets have been programs such as the tax credit for first-time homebuyers, according to Bob Walters, the chief economist for Quicken Loans.
"[But] the real driver in all of this -- from home sales to home pricing appreciation -- has been the protracted run of favorable mortgage rates," he said. "It will be interesting to see how home prices react when we see rates begin to increase, as they are sure to do over time."
Prices nationwide rose 3.1% in the three months ended Sept. 30, according to the S&P/Case-Shiller Home Price Index, a closely watched gauge of housing market direction. That followed a similar 3.1% rise during the second quarter of the year.
Prices were still below a year ago, however, down 8.9% compared with the third quarter of 2008. Nevertheless, that's an improvement from the double-digit price decreases the index had been reporting; the second quarter year-over-year decline was 14.7%. Prices had dropped 19% year-over-year during the first quarter of 2009.
We have seen broad improvement in home prices for most of the past six months," says David Blitzer, Chairman of the Index Committee at Standard & Poor's.
The Case-Shiller 20-City Composite index posted its fifth monthly increase in a row in September, rising 0.3% from August levels.
The worst performing market continued to be Las Vegas, where prices have dropped for 37 consecutive months. They're now 55.4% off their highs.
Midwestern cities staged a comeback in September, with Minneapolis and Detroit prices each gaining 1.8%, the most of any of the 20-cities covered. Chicago prices jumped 1.2%; San Francisco climbed 1.3%; and Los Angeles and Phoenix both rose 0.8%.
Stopping the home price slide is an important factor in any economic recovery. Falling prices increase the number of "underwater" homeowners, those who owe more on their mortgage balances than their homes are worth.
Underwater mortgage borrowers are much more likely to lose their homes to foreclosure. Indeed, it's a crucial factor in whether people lose their homes or not, as Mark Goldman, a San Diego State University real estate professor pointed out.
"If they have a home worth $300,000 and they owe $250,000 and can't pay their mortgage, they'll just sell the house," he said.
It's when they have a house worth $200,000 and they owe $250,000 that these people default, because the sale of the house would not pay their whole debt.
A report from First American CoreLogic released Tuesday, revealed that nearly a quarter of all mortgage borrowers are underwater. That, as well as the ongoing foreclosure problem, has contributed to doubt about the staying power of the recent price trend.
"I think it's temporary," said Pat Newport, a real estate analyst with IHS Global Insight. "I can't see home prices stabilizing as long as we have that problem."
According to Newport, foreclosures could worsen over the next several months as many toxic loans go through resets, making them much less affordable for their borrowers.
A significant contributor to the improvements in the housing markets have been programs such as the tax credit for first-time homebuyers, according to Bob Walters, the chief economist for Quicken Loans.
"[But] the real driver in all of this -- from home sales to home pricing appreciation -- has been the protracted run of favorable mortgage rates," he said. "It will be interesting to see how home prices react when we see rates begin to increase, as they are sure to do over time."
Wednesday, November 25, 2009
THANKSGIVING
I WILL RETURN FRIDAY, NOVEMBER 27TH FOR MORE UPDATES ON THE MORTGAGE MARKET. HAPPY THANKSGIVING!
Tuesday, November 24, 2009
FIVE TIPS ON TAPPING THE NEW TAX CREDIT
"We're going to see far more interest in the fourth quarter than we generally do because of the tax credit," said Heather Fernandez, vice president of Trulia.com, a real estate search engine. Traffic surged on the site on Nov. 5, the day Congress approved the credit extension, she said.
The new law extends the tax credit for first-time home buyers and opens it up to some existing homeowners as well: The credit is now 10% of the home price, up to $8,000 for first-time buyers and up to $6,500 for repeat buyers. Read more about the home-buyer tax credit on the Internal Revenue Service's Web site.
All buyers must have a binding contract on a house in place on or before April 30. The sale must close on or before June 30.
To be considered a first-time home buyer, an individual must not have owned a home in the past three years. And to be eligible, existing homeowners need to have lived in the same principal residence for five consecutive years during the eight-year period that ends when the new home is purchased. The credit is only for principal residences.
Income limits have risen as well. According to the IRS, the home-buyer tax credit now phases out for individuals with modified adjusted gross incomes between $125,000 and $145,000, and between $225,000 and $245,000 for people filing joint returns.
Will credit spur more buyers?
The inclusion of move-up buyers might inspire homeowners to take action and list their house if they've been putting it off, said Carolyn Warren, a Seattle, Wash.-based mortgage broker and banker and author of the book "Homebuyers Beware."
"If somebody loves their home, it's not going to entice them to sell. If they've had it on the back of their minds and really would like to move up, it might push them into doing it sooner than later," Warren said.
The credit isn't expected to have as large of an effect on move-up buyers as it has on first-time buyers, according to the Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions. The maximum tax credit is about 4% of the average purchase price for first-time buyers, but about 2% of the average purchase price for move-up buyers.
"We estimate that the first-time home-buyer tax credit will result in a 10% increase in home sales from March through November of 2009," said Thomas Popik, research director for Campbell Surveys, in a news release. "We'd expect the effect of the proposed tax credit for current homeowners to be about half as large -- from December until the tax credit expiration in the spring of next year, it might be 5% of 3 million transactions, or about 150,000 incremental home sales. Incremental sales to first-time home buyers could be an additional 300,000, for a total of 450,000 incremental sales due to the tax credit extension."
Tips for buyers
Interested in buying a home and claiming the home-buyer tax credit? Below are five tips:
1. Don't procrastinate
Get searching now. Getting an early start will give you a better chance of finding the right house before the credit deadline.
"Go out and start as soon as possible. There will be people waiting until the end," said Pat Lashinsky, chief executive of ZipRealty, a residential real-estate brokerage firm.
When first-time buyers thought the credit would expire Nov. 30, people scrambled to find properties in September and October, he said. In some cases, "there wasn't inventory that fit people's needs," he said. In Phoenix, Chicago and parts of California, for example, some properties even had multiple bidders, Lashinsky said.
Before you start house hunting, get preapproved for a mortgage, said Eddie Fadel, a Miami-based mortgage banker and author of the book "Don't Rent, Buy!" And do a realistic assessment of what you can afford.
Buyers who have to sell an existing home should price it aggressively from the beginning to drum up interest and get a buyer as soon as possible, Fernandez said.
2. Don't count on another extension
The credit won't be available forever, Fadel said. If you want to take advantage, be sure to make that spring deadline.
"This is a medication for the housing crisis. Once the patient -- which is the housing market -- cures, there will be no medication needed," he said.
3. Mind the interest rates
Mortgage interest rates are low right now, but will likely rise next year, Warren said. Higher rates will affect your monthly mortgage payments, thus the affordability of the house you are buying.
"It's pretty universally accepted that rates will be higher next year. What is unknown is how fast and by how much," Warren said.
Average rates on the 30-year fixed-rate mortgage have been hovering around 5%, but when the government stops buying large amounts of mortgage-backed securities, rates could rise, she said. The Federal Reserve plans to end its purchase program in March.
4. Communicate with your lender
Throughout the process, make sure you're communicating with your lender regularly; if there's a piece of documentation you're asked for, get it turned in as soon as possible, said Doug Heddings, a New York-based real estate agent with Charles Rutenberg Realty. Good communication is important in making sure the loan closes on time.
And think twice before pursuing a short sale if you want to make the credit deadline. That's where someone sells a home for less than what he or she owes on a mortgage, with permission of the lender. The process can be lengthy and unpredictable because the homeowner's lender has to approve any deal, and can be complicated when there is a second mortgage associated with the property, Warren said.
5. Don't take shortcuts
Don't forgo any of the steps you would normally take just to make the tax-credit deadline. Make sure the house is a good fit for your needs and get a home inspection, Lashinsky said. Skipping steps could cost you in the long run.
"Don't let the tax credit get you to make a decision to buy a house that you wouldn't otherwise want to buy," he said. "Don't shortcut the process to get the tax credit."
The new law extends the tax credit for first-time home buyers and opens it up to some existing homeowners as well: The credit is now 10% of the home price, up to $8,000 for first-time buyers and up to $6,500 for repeat buyers. Read more about the home-buyer tax credit on the Internal Revenue Service's Web site.
All buyers must have a binding contract on a house in place on or before April 30. The sale must close on or before June 30.
To be considered a first-time home buyer, an individual must not have owned a home in the past three years. And to be eligible, existing homeowners need to have lived in the same principal residence for five consecutive years during the eight-year period that ends when the new home is purchased. The credit is only for principal residences.
Income limits have risen as well. According to the IRS, the home-buyer tax credit now phases out for individuals with modified adjusted gross incomes between $125,000 and $145,000, and between $225,000 and $245,000 for people filing joint returns.
Will credit spur more buyers?
The inclusion of move-up buyers might inspire homeowners to take action and list their house if they've been putting it off, said Carolyn Warren, a Seattle, Wash.-based mortgage broker and banker and author of the book "Homebuyers Beware."
"If somebody loves their home, it's not going to entice them to sell. If they've had it on the back of their minds and really would like to move up, it might push them into doing it sooner than later," Warren said.
The credit isn't expected to have as large of an effect on move-up buyers as it has on first-time buyers, according to the Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions. The maximum tax credit is about 4% of the average purchase price for first-time buyers, but about 2% of the average purchase price for move-up buyers.
"We estimate that the first-time home-buyer tax credit will result in a 10% increase in home sales from March through November of 2009," said Thomas Popik, research director for Campbell Surveys, in a news release. "We'd expect the effect of the proposed tax credit for current homeowners to be about half as large -- from December until the tax credit expiration in the spring of next year, it might be 5% of 3 million transactions, or about 150,000 incremental home sales. Incremental sales to first-time home buyers could be an additional 300,000, for a total of 450,000 incremental sales due to the tax credit extension."
Tips for buyers
Interested in buying a home and claiming the home-buyer tax credit? Below are five tips:
1. Don't procrastinate
Get searching now. Getting an early start will give you a better chance of finding the right house before the credit deadline.
"Go out and start as soon as possible. There will be people waiting until the end," said Pat Lashinsky, chief executive of ZipRealty, a residential real-estate brokerage firm.
When first-time buyers thought the credit would expire Nov. 30, people scrambled to find properties in September and October, he said. In some cases, "there wasn't inventory that fit people's needs," he said. In Phoenix, Chicago and parts of California, for example, some properties even had multiple bidders, Lashinsky said.
Before you start house hunting, get preapproved for a mortgage, said Eddie Fadel, a Miami-based mortgage banker and author of the book "Don't Rent, Buy!" And do a realistic assessment of what you can afford.
Buyers who have to sell an existing home should price it aggressively from the beginning to drum up interest and get a buyer as soon as possible, Fernandez said.
2. Don't count on another extension
The credit won't be available forever, Fadel said. If you want to take advantage, be sure to make that spring deadline.
"This is a medication for the housing crisis. Once the patient -- which is the housing market -- cures, there will be no medication needed," he said.
3. Mind the interest rates
Mortgage interest rates are low right now, but will likely rise next year, Warren said. Higher rates will affect your monthly mortgage payments, thus the affordability of the house you are buying.
"It's pretty universally accepted that rates will be higher next year. What is unknown is how fast and by how much," Warren said.
Average rates on the 30-year fixed-rate mortgage have been hovering around 5%, but when the government stops buying large amounts of mortgage-backed securities, rates could rise, she said. The Federal Reserve plans to end its purchase program in March.
4. Communicate with your lender
Throughout the process, make sure you're communicating with your lender regularly; if there's a piece of documentation you're asked for, get it turned in as soon as possible, said Doug Heddings, a New York-based real estate agent with Charles Rutenberg Realty. Good communication is important in making sure the loan closes on time.
And think twice before pursuing a short sale if you want to make the credit deadline. That's where someone sells a home for less than what he or she owes on a mortgage, with permission of the lender. The process can be lengthy and unpredictable because the homeowner's lender has to approve any deal, and can be complicated when there is a second mortgage associated with the property, Warren said.
5. Don't take shortcuts
Don't forgo any of the steps you would normally take just to make the tax-credit deadline. Make sure the house is a good fit for your needs and get a home inspection, Lashinsky said. Skipping steps could cost you in the long run.
"Don't let the tax credit get you to make a decision to buy a house that you wouldn't otherwise want to buy," he said. "Don't shortcut the process to get the tax credit."
Monday, November 23, 2009
REFINANCE NOW! RATES COULD BE ON THE RISE!
A looming shift in Federal Reserve policy could send the 30-year fixed mortgage to 6% or higher, up from Monday’s rock-bottom rate of 5.02%. For all the hullaballoo about the stimulative impact of last week’s decision to extend the $8,000 First-Time Home Buyer Tax Credit and create a $6,500 credit for current homeowners, a sharp rise in the bellwether mortgage rate could muck up a housing recovery.
For the past year the Federal Reserve’s voracious $1.25-trillion purchase program of mortgage-backed securities has effectively pushed the 30-year conforming fixed-rate mortgage lower than it would normally be. Typically the conforming FRM is about 25 basis points lower than the rate on a jumbo mortgage. According to Bankrate's latest weekly survey, the difference is more than one percentage point (6.24% vs. 5.19% as of Nov. 10).
But the Federal Reserve has signaled that it intends to wind down its purchase program by the end of the first quarter of 2010. Analyst Meredith Whitney recently dubbed the Fed’s “Great Exit” the biggest risk for banks and the markets over the next four months. And consumers.
Absent another big buyer (or set of buyers) stepping up and taking the Fed’s place, rates would likely rise. If the jumbo/conforming spread reverts to its historic norm, we’re looking at a 30-year fixed rate mortgage closer to 6% based on today's levels. That could translate into a decline of 10% or so in home buyers' purchasing power. A $300,000 mortgage at 5.02%, for example, works out to about $1,614 a month. At 6% you’d need to drop the mortgage amount to less than $270,000 to keep the monthly payment at $1,614. As Amanda Gengler points out in her 2010 Housing Outlook, prospective buyers and refinancers should look to lock in a rate sooner rather than later.
For the past year the Federal Reserve’s voracious $1.25-trillion purchase program of mortgage-backed securities has effectively pushed the 30-year conforming fixed-rate mortgage lower than it would normally be. Typically the conforming FRM is about 25 basis points lower than the rate on a jumbo mortgage. According to Bankrate's latest weekly survey, the difference is more than one percentage point (6.24% vs. 5.19% as of Nov. 10).
But the Federal Reserve has signaled that it intends to wind down its purchase program by the end of the first quarter of 2010. Analyst Meredith Whitney recently dubbed the Fed’s “Great Exit” the biggest risk for banks and the markets over the next four months. And consumers.
Absent another big buyer (or set of buyers) stepping up and taking the Fed’s place, rates would likely rise. If the jumbo/conforming spread reverts to its historic norm, we’re looking at a 30-year fixed rate mortgage closer to 6% based on today's levels. That could translate into a decline of 10% or so in home buyers' purchasing power. A $300,000 mortgage at 5.02%, for example, works out to about $1,614 a month. At 6% you’d need to drop the mortgage amount to less than $270,000 to keep the monthly payment at $1,614. As Amanda Gengler points out in her 2010 Housing Outlook, prospective buyers and refinancers should look to lock in a rate sooner rather than later.
Friday, November 20, 2009
Now is a great time to Refinance!
Why Refinance?
There are many numbers of reasons to refinance a mortgage, the most common is to lower an existing rate in order to lower your payment. Today, refinancing an adjustable rate mortgage with an imminent rate increase is becoming commonplace. Before you refinance you should have your Equitable Bank Loan Officer help evaluate your current situation. They will make sense of both the benefit and cost of refinancing your home today.
Here are other refinancing options for you to consider:
Build Equity
If you currently hold a longer-term loan and can afford a larger payment, refinancing would allow you to apply a greater portion of your monthly payment to the principal portion of the loan.
Cash Out On Your Equity
Tap into your home's equity by exploring a cash out option by refinancing. This is often the preferred option for homeowners who are looking to purchase that big ticket item, paying off debt or paying for that school tuition.
Rebuild Credit
If you had a few dings on your credit you most likely paid for it with a higher rate. Now that your credit is back on track, lower your payments by refinancing to a lower rate.
Eliminate PMI
A lack of a down payment at purchase required you to purchase Personal Mortgage Insurance to guarantee your rate. Now that you’ve made a number of payments and the equity in your home has increased, eliminate the PMI payment you make each month by refinancing today.
There are many numbers of reasons to refinance a mortgage, the most common is to lower an existing rate in order to lower your payment. Today, refinancing an adjustable rate mortgage with an imminent rate increase is becoming commonplace. Before you refinance you should have your Equitable Bank Loan Officer help evaluate your current situation. They will make sense of both the benefit and cost of refinancing your home today.
Here are other refinancing options for you to consider:
Build Equity
If you currently hold a longer-term loan and can afford a larger payment, refinancing would allow you to apply a greater portion of your monthly payment to the principal portion of the loan.
Cash Out On Your Equity
Tap into your home's equity by exploring a cash out option by refinancing. This is often the preferred option for homeowners who are looking to purchase that big ticket item, paying off debt or paying for that school tuition.
Rebuild Credit
If you had a few dings on your credit you most likely paid for it with a higher rate. Now that your credit is back on track, lower your payments by refinancing to a lower rate.
Eliminate PMI
A lack of a down payment at purchase required you to purchase Personal Mortgage Insurance to guarantee your rate. Now that you’ve made a number of payments and the equity in your home has increased, eliminate the PMI payment you make each month by refinancing today.
Thursday, November 19, 2009
HVCC and why it doesn't work
The objective of HVCC was to prevent pressures being imposed on appraisers to raise values. HVCC prevents the loan officers, mortgage brokers and realtors who work with borrowers from pressuring appraisers to get a deal done in time to meet a deadline. Further, they can no longer keep their clients informed about the status of an appraisal because they are no longer in the loop. HVCC has also pretty much eliminated the ability of a borrower to use the same appraisal with multiple loan providers. Before HVCC, brokers could use an appraisal with any wholesale lender and move it to another lender if need be. This is no longer the case. In sum, the HVCC "cure" for the appraisal problem of overvaluation has been implemented n a market where the probelm has become undervaluation, and HVCC is making that problem much worse. It should be scrapped. When normal markets re-emerge, it will be time to reconsider how appraisals can be made independent without disrupting business relationships that have served borrowers well.
Wednesday, November 18, 2009
Tax Credit Extended!
The Federal Government has decided to extend the first time homebuyers tax credit until April 30th 2010. Consumers who have not purchased a primary residence in the last 3 years will be eligible for an $8,000 tax credit. A $6,500 credit will be available to exisiting homeowners on a new purchase. To qualify for this credit, the homeowner must have purchased their current residence more then 5 years ago and must purchase a primary residence. The combination of this tax credit and low interest rates should spur purchase business over the next six months.
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