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Home Sales Up in February?
2008-03-25 14:39:00
Home sales were reported as being up for the month of February by the National Association of Realtors. This was a surprise to many economists who expected yet another decline in purchasing volume. Sales in Utah reflected the national numbers as well.Alas, this report was yet another don't believe the headlines, believe the numbers type of story. To get the true picture, I had to go to multiple sources.Let's start with the national picture. CNNMoney reported Home sales rise slightly on biggest-ever price drop.The National Association of Realtors reported that sales by homeowners rose 2.9% in February to a seasonally adjusted annual pace of 5.03 million, up from January's reading of 4.89 million. It was the first month-over-month rise of the annualized pace since July.The volume of sales were up in February over January. That's actually good news in itself, but I disregard month over month comparisons. It's year over year that matters.Though February's pace beat economist...
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Private Mortgage Insurance Locks Out Potential Homebuyers
2008-03-23 23:55:00
Contagion is probably the best word to describe the far reaching effects of the housing downturn. Private mortgage insurance seems to be the latest portion of the mortgage business tightening standards and the fallout will remove conventional 100% financing programs from the marketplace.I was first made aware of the problem when working with a client. The loan rep claimed Freddie's expanded approval program, which offers 100% LTV, no longer has mortgage insurance available, which essentially removes that option from borrowers. This is not a Freddie Mac policy, but a condition of the marketplace. As a result, a program exists nobody can qualify for. This will soon be eliminated.The same representative explained other approval levels should see the same thing happen. What this means is 100% conventional loans will probably disappear quite soon. Meanwhile, my borrower hangs in the balance hoping to close before these changes take place.Yahoo! News reported similar findings last...
More About: Insurance , Mortgage , Mortgage Insurance , Private Mortgage Insurance

Higher Loan Limits Have Steep Costs
2008-03-21 02:59:00
I'm not sure what the right word is...irony...stupidity, but Congress' action to help the housing market may actually hurt it.What am I talking about? The higher temporary loan limits passed in the stimulus package. We've wondered for some time what the true cost to these higher limits would be and this week we got more answers. I reported last week that conforming jumbo rates would increase .25% for fixed rate loans, while ARMs would see a .75% hit to rate. This week, we've learned FHA's increased loan limits would see a 2.5% hit to price. That's a pretty big hit to absorb at one time.I'll go into some further detail of the implications of this higher pricing in a future post, but my gut reaction is higher loan limits won't help as much as Congress originally hoped or intended.Thinking about this over the past week has led me to come to the following conclusions:1. Borrowers on the cutting edge for a refinance, that don't have much equity, won't see help from higher ...
More About: Loan , Limits , Higher , Costs

Fed Chops Rates, But Housing Won't Benefit
2008-03-19 14:22:00
The Federal Reserve Board chopped rates a whopping .75% yesterday. In a widely expected move, short term interest rates now sit at 2.25%. The discount rate, a previously rarely used credit facility allowing direct borrowing from the Fed, was cut to 2.5%. Wall Street responded positively with the Dow sharply up 420 points.Yet this cheaper money will probably not benefit housing. Why? On the same day the Fed was cutting, a major investor was tightening FHA standards. I found out Chase has eliminated FHA loans below 580 and tacked on a hefty 3% hit to price for those with credit scores of 580-599. A 2.5% hit to price is being tacked on to the newly created Jumbo FHA loans.While these price ads and credit tightening are not across the board FHA policies, the fact a big mortgage investor is making these changes suggests other investors will soon follow. I thought the increased loan limits wouldn't affect the price of FHA loans like it did with conforming, but I was wrong. Some...
More About: Housing , Chops , Rates , Benefit

Emulating the Mainstream Media
2008-03-14 19:15:00
It's been a busy week in the real estate world. New bailout proposals surfaced. New loan limit limitations became clearer. Mortgage rates were on a roller coaster. I haven't commented on any of it. I've been busy too, but I'll have a bunch of new stuff this weekend.Today, I'm going to take a page from the MSM and talk about the most important thing to happen in real estate this week. Michael Jackson saved Neverland Ranch from foreclosure. Though from the looks of it, there's not too much to be saved.Jackson hasn't lived there since 2005, so some may question the financial prudence of saving a $24.5 million estate, one hasn't set foot in for three years. I suppose Jackson's action shows there is still some shame in being foreclosed on, despite other homeowners ruthlessly walking away.One TV personality who didn't save his home from foreclosure is local attorney Keith Barton. For those of you not in the Salt Lake market, Barton is one of those stereotypical, ambulan...
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New Loan Limits ? Are There Strings Attached?
2008-03-08 20:54:00
Since it became apparent loan limits would change, the unanswered questions have been, ?What will it cost?? and ?Are there strings attached?? A day after the new loan limits were announced, the strings were revealed as well.What:First of all, these new loans have a name. It?s jumbo conforming. My ?mid jumbo? nomenclature didn?t make the cut. Neither did Tanta?s ?loans formerly known as jumbo.?It also appears the product offering is going to be pretty narrow. A 30 year and 15 year fixed will be available April 1st, with 5/1 ARM coming May 1st.How:Because of the speed this program has been rolled out, there will be no automatic underwriting. A human being will review every purchase and refinance made under this program.Loan to values:Purchase ? 90% LTV/CLTVRefinance ? 75% LTV/95% CLTVARM Purchase ? 80% LTV/CLTVARM Refinance- 75% LTV/90% CLTVInvestment Properties ? 60% LTV/CLTVCredit Scores/Debt to Income:660 minimum700 above 80% LTV45% max DTIFull documentationPricing Adjustments...
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How Did Salt Lake Get Maximum Loan Limits?
2008-03-08 18:08:00
I'll admit it, I hate to be wrong. Since the stimulus package passed, I've maintained on this blog that loan limits for conforming and FHA probably wouldn't increase in Salt Lake City. The new loan limit would be based on 175% of the median home price which would put SLC at $407,750, which is lower than the existing conforming limit at $417,000. So $729,750 as the new loan limit for FHA and Conforming in Salt Lake was quite the surprise!Then I started reading around some of the other real estate blogs in other markets discussing the same topic. Areas like Seattle, Portland, Las Vegas and Phoenix didn't max out. In fact, Las Vegas didn't change at all. So I decided to do a little research.Below are the top populated Western cities with California excluded. The first column is the median price, determined by the NAR 2nd quarter 2007. The second column is the new FHA loan limit, with the third being the new conforming limit.Albuquerque 199,600 271,050 417,000Boise 212,800 303,750 ...
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Conforming Loan Limits Up In Salt Lake City
2008-03-06 20:30:00
"Holy tomato!" exclaimed Byron Goates, PLM of Integrity First Financial, "Conforming limits are up too!"Indeed they are. Conforming loan limits for single family housing in Salt Lake City rose to $729,750, effective March 5, 2008. Like the FHA increases, these too are temporary until the end of the year. Tooele and Summit counties also recieved the upward bump. Heber City saw loan limits increase to $431,750. All other counties remain at the $417,000 cap.It may be some time before we know what the costs associated with the higher limits will be, but now we know what the temporary limits will be.I suspect that along with high inventory and low rates, the new loan limits will jump start the housing market again. Heaven help us all if it doesn't.
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FHA Mortgage Limits Increase in Utah
2008-03-06 20:15:00
The FHA announced the new temporary loan limits as part of the stimulus package recently passed by Congress. For single family housing, here are the new limits in Utah 's most populated counties:Salt Lake County - $729,750Utah County - $323,750Tooele County - $729,750Davis County - $397,500These new, temporary limits far exceed the 125% of median prices called for in the stimulus package, but the legislation allows limits to max out at $729,750, hence the disparity. My previous assumptions were based on the 125% provision. When conforming loan limits are announced, I expect them to mirror FHA.There is no news on rates, but I expect FHA mortgage rates to remain the same as their securitization process works differently than conforming.
More About: Mortgage , Limits

Richard Culbertson Faces Mortgage Fraud Charges
2008-03-06 16:14:00
Do you remember Richard Culbertson? He was the Mayoral candidate in Eagle Mountain who had his real estate license stripped for mortgage fraud weeks before the election. Now he's facing criminal charges.Along with his wife Kathleen, Culbertson is being charged by the State's Attorney General office for falsifying information on loan documents and recruiting straw buyers to purchase homes. The indictment claims the Culbertson's benefited some $60,000 through illegal cash back at closing.Like the Riverbottoms scheme, the tactics used are the same, but the dollar amounts and number of transactions are far fewer. The Culbertson's are being prosecuted under a new Utah mortgage fraud law, though they could still face Federal charges as well.
More About: Fraud , Mortgage Fraud , Faces , Mortgage

FHA Loans Provide Ray of Sunshine
2008-03-05 03:21:00
Sometimes I think I spend too much time on housing bubble blogs. It's good to see different perspectives of course, but sometimes the negativity is overwhelming, particularly when I'm witnessing different things out in the field.Even some of the top economists and politicians are a bit out of touch. Last week for instance, our fearless leader President Bush didn't realize gas prices could be hitting $4.00 a gallon this year. Today Ben Bernanke called for principle reduction programs for struggling homeowners. If adopted, this plan is a further disincentive to make mortgage payments. We're already seeing some homeowners walk away from mortgages they could pay for because the law was changed regarding tax liability. The Fed Chairman did have some honest and accurate portions of his speech including the fact many second lien holders are refusing to subordinate; meaning to remain in second position if the first mortgage is refinanced. They are refusing so at their own peril. I...
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Ruthless Walk Aways - A False Start
2008-03-02 18:18:00
If you've been reading any financial news lately, no doubt you've come across an article suggesting homeowners are walking away from homes they can afford the payment on, simply because the house value has gone down.I've even written about the phenomenon. Long time readers of this blog know I question the mainstream media on its reporting. My line is don't believe the headlines, believe the numbers. The walk away trend is something I've fallen for without looking at the numbers closely enough. Last week Mike Shedlock provided the numbers. At least I thought he did, until I read an article yesterday on Calculated Risk going through his data. Both articles are worth the read. Mike and Tanta provide a level expertise I simply don't possess. As you'll see Tanta, possesses a level of experience that Mike doesn't have.If I can bottom line Tanta's well written and lengthy post, it is the idea of a ruthless walk away - meaning someone who can afford their mortgage, but choos...
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Everybody Pays For Loan Limit Increases
2008-03-01 01:55:00
A lot of people have had questions about the new temporary loan limits for conforming and FHA loans legislated by the Stimulus Package of 2008.We've discussed here on several occasions the true implications to the conforming mortgage markets behind these higher limits. Specifically, how much is it going to cost in rate for higher conforming limits. The answer may be .55% - a number that is about mid way between existing conforming and Jumbo loans, hence my terminology of mid Jumbo.The Bank of Ann Arbor wrote in an industry newsletter -Freddie Mac recently announced (and Fannie Mae is expected to follow identically) increases in overall fees (changing the 25bp Adverse Markets Deliver Fee to 55bp) and deeper FICO hits for loans with an LTV > 60% and representative FICO score under 720. We expect these changes to begin to be implemented by lenders at large starting in mid March, but not necessarily applying to all transactions until late April or May.What this means is the mar...
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Utah Foreclosure Rate Increases
2008-02-27 01:31:00
Utah's real estate market has slowed considerably and foreclosures are starting to rise. According to RealtyTrac, foreclosures in Utah increased by 4.99% in January compared to the previous year. This was a 16.49% increase over December, 2007.Compared with the rest of the nation, Utah is firmly in the middle, ranking #22. Historically, Utah has ranked very poorly in financial metrics including bankruptcies, foreclosures and mortgage fraud. 200 homes began the foreclosure process in Utah last month and nearly a 1000 are bank owned or REO.Besides new homes, foreclosures can present some opportunities for real estate investors, but they also present pitfalls. I was looking at an REO the other day in Sugarhouse. It was obviously a failed flip as this two unit home had the upstairs in working order, but the main floor had been stripped. The condition of the home makes it unlikely to obtain bank financing. Only a private lender or someone with cash could buy it.About five years a...
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Salt Lake City Rental Market on the Rise
2008-02-24 19:40:00
They say that all real estate is local. Of course right now the underlying credit process has problems nationally, but for Salt Lake real estate the market is better. One indicator that demonstrates this is rents. In the most bubblicious parts of the country rents have declined as unsold homes flood the rental market and condo towers are converted to apartments.Despite a rise in the number of new homes for sale in Salt Lake, rents in 2007 increased 8.8%. Vacancy rates declined significantly as well, meaning real estate investors in Utah should be doing quite well. Rents are expected to rise again this year.Vacancies in Salt Lake County fell from a high of 10.9 percent in December 2002 to 4.5 percent at the end of last year, the lowest in more than 10 years.The apartment market is considered fully rented when the vacancy rate is 5 percent.Higher rents are good for investors and they can also push home buying fence sitters into making a purchase. Lower interest rates and a sof...
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Credit Crunch - Make Decisions Keeping You Viable for a Mortgage
2008-02-24 16:49:00
You can't open a newspaper or watch TV without hearing something about the credit crisis, the housing crisis or the mortgage crisis. Once thought to be contained to only people with bad credit or subprime loans, it's become clear that it's not.In England an online credit card provider just yanked thousands of credit accounts from high risk borrowers. The risk? These borrowers paid off their accounts each month and didn't pay interest.Over here Bank of America (BAC) and Washington Mutual (WM) are raising interest rates on customers who pay their bills on time.CNN reported yesterday -Consumers have racked up more than $2.2 trillion in purchases and cash advances on major credit cards in just the last year. And it's become a habit for them to spend more than they have. The overall credit card debt grew by 315 percent from 1989 to 2006, according to public policy research firm Demos. To compound the problem, fewer people are paying their credit cards bills on time. The per...
More About: Credit , Mortgage , Make , Crunch , Decisions

Daybreak Real Estate - A Guarantee
2008-02-24 04:03:00
An article about new homes in Utah states the number of permits taken out in January are at a 17 year low and 74% below last year. On top of that, the number of unsold new homes is also at a record high.Even with the drop in new-home construction, though, Newreach is estimating that it will take 10 months to sell the county's inventory of new, unoccupied homes - even if no new homes were constructed during that time period.Enter Daybreak, the master planned community on the West Bench that is owned by Kennecott Land. This is a popular community with a number of contributing builders offering a wide range of housing from condos to large homes. All the builders, save one, are offering price guarantees in a promotion that started in January.Many builders, struggling to cope with the downturn, continue to offer incentives to lure buyers. At the Daybreak residential development in South Jordan, all but one builder - Richmond American - has agreed to participate in a Smart Buy pr...
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Be Prepared for Mortgage Application and Rate Locks
2008-02-23 03:46:00
The mortgage markets are quite volatile right now with rates ebbing and flowing up and down. To get the best deals, one has to be prepared and be prepared to act quickly. Two things any borrower must factor in are personal preparation and rate locks. Reader Kirsten writes: Nigel, when you refer to organizing your personal paperwork and having a "clean file," what does that mean? If I plan on making the mortgage app leap at some point, is that something I should know about?Good question. The amount and type of paperwork you'll need depend on whether you are self-employed, commissioned or a regular W-2 employee. Regular employees have it the easiest as they need only bring in two years of tax returns, the last two pay stubs, financial information substantiating assets like bank statements, 401k statements and the homeowners insurance agent information.Commissioned, overtime and other W-2 employees who have been on the job for less than two years can only have their base income co...
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Ron Clarke Realtor - Why Does he Still Have a License?
2008-02-22 03:44:00
So I was driving in Provo yesterday and stumbled across this real estate sign. It belongs to none other than Ron Clarke . You know, the Ron Clarke facing a federal indictment for mortgage fraud by manipulating prices on the MLS.I love the Constitution and believe very much in due process of law. Innocent until proven guilty. However real estate licensing and civil proceedings fall outside of that realm a bit. Surely the Division of Real Estate should be investigating Mr. Clarke as well?We already know Bradley Kitchen is still trying to scam people. It appears the DRS is allowing Ron Clarke to continue as well. What I'd like to know is who are the people continuing to do business with him? How does he explain away a Federal indictment to potential clients? Why would you buy a property listed from Ron Clarke when he's accuse of causing overvaluation in excess of $1,000,000 per home? Why would you even want a single cent in commission to end up in his pocket?It's interestin...
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Utah Real Estate - Signs of the Times
2008-02-22 01:57:00
Sometimes a picture is worth a thousand words. I saw this sign in Orem, Ut yesterday while I was down there on business. The times sure have changed. It's funny they would take this approach as Utah 's foreclosure rate has dropped over the past two years. Maybe it's a marketing tactic given all the bad news in real estate?
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New Mortgage Bailout Plan - What Are They Thinking?
2008-02-21 05:46:00
A new plan to help struggling mortgage lenders was released today. The plan calls for homeowners that would be forced into foreclosure or a short sale to issue an IOU for the difference between what they owe and what their home is currently valued. In turn the lender would reduce the loan amount and loan payments. Should home values rise again, the IOU would be exercised by the lender.But instead of having lenders forgive the difference between the old mortgage and a house's current resale value, called a short sale, the OTS advises that lenders issue a warrant or "negative amortization certificate" for the difference. If a home regains its market value and is then sold, lenders have first claims to the profits.Like the super SIV plan that failed in December, I think this plan demonstrates exactly how desperate many mortgage lenders are. This is a one sided plan allowing accounting chicanery to take losses off the books without the lender having to suffer a loss.The hope is tha...
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Pay Off Debt or Save?
2008-02-16 02:24:00
A common question I see on message boards and blogs concerns saving versus paying off debt. This is of particular importance when the savings is being used as a down payment on a home purchase.With low returns on savings and high borrowing costs it would seem on its face to be an easy question to answer - pay off the debt. But with uncertain economic times, it feels safer and therefore smarter to keep a stockpile of cash.Let's take a look at it from a mortgage perspective. I put together the following scenario that really hammers home the importance of debt reduction in comparison to down payments. The loan scenario is an FHA loan purchase with 3% down. The borrowers have a lot of consumer debt together and have enough extra money to pay off a car costing them $300 per month.As it stands, their debt to income ratio is too high to qualify for the program they're being put into. With $8800 that could be paid towards the auto, we apply it to the down payment in the next image.B...
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Loan Limit Increase Creates New Loan Class
2008-02-16 01:39:00
One of the unknowns about the stimulus package is whether the newly raised conforming loan limit would have the desired effect of allowing homeowners in higher cost real estate markets to refinance or purchase using lower priced conforming interest rates.We got the answer today; NO! Well, it's part of the answer anyway.The Securities Industry and Financial Markets Association, a banking industry group, said those larger loans above the former limit of $417,000 will not be allowed on a widely used trading market, known as the "To Be Announced" market, which permits investors to buy and sell mortgage-backed securities before the loan pools are put together.You may recall the implications and explanations of this were discussed previously. Essentially the SIFMA has said the newly conforming loans will have to be priced differently to be traded on the TBA market. Whether that price adjustment is a savings from Jumbo rates, we don't yet know. Remember also, the risk being concerned...
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Utah Real Estate - Strategic Planning for the Housing Crisis
2008-02-14 15:25:00
Yesterday we were talking about the potential effects of the stimulus package and the other measures taken by the Fed and lenders to ease the housing crisis. Today let's talk about how this could affect Utah 's real estate market and how you can position yourself to take advantage.First of all, Utah's real estate market has slowed down quite a bit, but prices are remaining high. Certain areas like Northern Utah County have a glut of new homes on the market and prices have come down there, but overall owners selling houses are resistant to lowering prices.KSL reported Monday - Market analysts say home prices are still high, and few people are buying.Bingham says fewer than 3,000 homes went on sale in December of 2006, and more than 1,200 sold. Compare that to December of 2007, where nearly 7,000 homes went on the market, and less than 800 sold.Unlike some markets in the country Utah saw a decrease in foreclosures in 2007 by 25%. Home values have held up and you don't read abo...
More About: Estate , Real Estate , Planning , Housing

Housing Crisis Remedies - Should We Hold Our Breath?
2008-02-14 04:09:00
It's wait and see time for both the American economy and the housing market. Today President Bush signed the stimulus package into law though many of the big provisions concerning housing won't take place until the summer.Yesterday it was announced the nation's largest loan servicers were freezing foreclosures for 30 days so possible workouts could take place. This includes shifting both interest rates and loan balances lower. What's new about this shift in attitude is the policy is not just for subprime loans. All delinquent borrowers can be helped.The Fed has already lowered rates significantly and FHASecure is available to help troubled subprime borrowers. What can be done has been done. Now we wait and see.Struggling and even not so struggling homeowners in certain markets have shown a proclivity just to walk away if their homes are going to lose value. Giving them another 30 days may be an additional incentive to walk and pocket the mortgage payment. Further, Projec...
More About: Housing , Breath , Crisis , Hold , Remedies

FHA Wants to Help You Refinance
2008-02-13 07:09:00
With the problems across the country in subprime lending that have spread to conforming lending, it's no wonder FHA loans have become more and more appealing. Trouble is, few people are taking advantage of the programs being offered, including FHA Secure that allows homeowners who are behind on payments due to ARM resets to refinance.Last week FHA started sending out letters to hundreds of thousands of American homeowners letting them know about the available programs.Letters are being sent to homeowners who have already faced or are experiencing the first reset of their adjustable rate mortgages, Jackson said, and live within geographic locations that are currently subject to FHA loan limits nationwide.FHA loan limits are expected to increase when President Bush signs the stimulus package into law tomorrow.I've always felt FHA provides a pretty decent solution for first time home buyers, but it was neglected during the housing boom because of things like income qualification ...
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Why the Stimulus Package is Overrated - Part 2
2008-02-12 01:03:00
Yesterday I talked about the difficulty loan limit increases in the stimulus package would have in keeping mortgage rates low. Today I'd like to talk about the heart of the package; the checks.From all the talk from the media, it sounded like we would be getting free money. We all know there's no such thing as free money. I figured the money for the checks in the $170 billion package would come from higher taxes at a future date or from cutting spending somewhere else. When Congress passed the package last Friday, the real details of the plan came out. These checks are the government wasting resources by cutting a check and handing us a cash advance of our own money...from next year's returns.I never had much faith in the "rebates" as I never got my $300 in 2001. But this year's rebate is a big, steaming pile of Mr. Hankey. CNN reported Friday -Do I have to pay the rebate back?No. And here's why.Your rebate is a one-time tax cut - an advance on a credit you'll receive on...
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Why the Stimulus Package is Overrated - Part 1
2008-02-11 02:24:00
As many of you may have heard in the news, Congress has approved a $170 billion stimulus package for the economy that President Bush seems very likely to sign in its current state. Gathering most of the headlines is the token check that will be sent out ranging between $600 - $1200 per family, dependent upon a number of factors. What hasn't received a lot of attention are the changes that could stem the foreclosure and housing crisis. I will address these changes first.At the heart of the housing portion of the stimulus package are increases in both the conforming and FHA loan levels. For a while I thought this was the obvious and cheapest alternative to stemming the tide of foreclosures and maintaining the housing market. However, I didn't fully understand the underlying economics of loan limits.Tanta at Calculated Risk set me straight - in an instructive way - on a few things. Let's recap real quickly the stimulus package calls for a temporary rise of the conforming loan ...
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Credit Card Companies Place Squeeze on Good Customers
2008-02-10 17:19:00
If you're in the senior management of one of these big mortgage lending banks that's had to write down billions of dollars of losses due to the declining real estate market, where should you look to create a turnaround? Somehow, Citibank (C), Bank of America (BAC) and Washington Mutual (WM) think alienating their good customers makes sound financial sense.Consider that Citibank decided to cancel 161,000 Egg branded credit cards in England after a risk review. It makes sense that customers whose risk profile has changed could be subject to this type of behavior. In the instance of Egg, the customers being cut off are those who pay their entire balances on a monthly basis! Theoretically, these are the best customers with the least amount of risk. The problem? Citibank wasn't making enough money through fees. Rather than keeping them for goodwill, they've created a public relations calamity that can't be good for business.CREDIT card customers who pay off their balance each...
More About: Companies , Card , Credit , Customers , Credit Card

Once, Twice, Three Times a Stimulus Package
2008-02-08 06:46:00
A deal on the stimulus package has been struck. How much? Do I have $150 billion? No! $200 billion? No! $170 billion? Deal! Yes, the much touted stimulus plan has been passed by Congress. A signature by President Bush is the only obstacle in its way.The House and Senate on Thursday overwhelmingly approved a roughly $170 billion plan aimed at spurring the economy by sending rebate checks to millions of taxpayers, offering tax breaks to businesses and trying to ease the home lending crunch.I'm not a fan of small checks from the government. I don't mind a tax refund, but I haven't had one of those in 10 years. I can only imagine the labor costs in sending out 137.2 million checks for $600. It's an election year. What are we going to do?Where the impact of this legislation lies for the housing market is in the changes to GSE's and FHA for loan limits. Thanks to a lesson from Tanta at Calculated Risk, I no longer think that loan limit increases will be a huge savior. ...
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