Saturday, December 31, 2011

2011, a very good year for RE/MAX in Salida

by Terry Brown

I joined the ownership of RE/MAX Mountain River in July 2011.    I had originally tried to put the deal together with a friend of mine being the partner, instead of myself, who had decades of Real Estate background but failed to get him to move from the sun and beach to the high country blue skies of Colorado...    Not sure it he made the right decision, but it seems that it may have been a home run for myself.

In just a few months, our company repositioned itself from just making it into the top 10 in our area to holding the number 1 spot in Sales for most of the last half of 2011 - something that has created a buzz in the Real Estate community here.    We went from 4 agents to 6, and now we are about to bring on another 2 in the next couple of weeks which means we have doubled our fire-power.    With me getting my license and another person who is sure to join us, we will bring our sales force to 10 before the busy sales season begins in the spring of 2012.   Yep, all the moons are aligning to be a great year.

I guess the best thing I'm happy about is that my partner & I have setup our Real Estate firm to be lean and mean, as we own our location.    From estimates, we're about 2/3 less in overhead than our major competitors in town - yet they are ALL mom & pop operations.    In just 6 short months we are in the black ink - many months earlier than I projected.   Plus, we have the largest National Flag available for a Real Estate firm as our backbone.   Yep, bring it on 2012, we're ready!

Salida doesn't get the huge increases in Real Estate prices like the rest of the country, but our prices are strong per square foot.   The number of monthly inventory is reducing, but it is still a Buyer's Market.  Our attraction is low crime rate, clean air, and unlimited amount of outside playground - all year long.    Salida has a brand new High School being built, a pretty large selection of national and local restaurants for a town of this size, and Monarch Ski area is planning even more expansion.   We have a nice mix of Liberal & Conservative values, so everyone fits right in.    We are America - or maybe the way most remembered America a few decades ago...  

We're projecting there will be some major changes with Real Estate firms in Salida for 2012.    We know who our competitors are, who are growing and who are dying a slow financial death.    I cannot say anything here of who will do what, but pay attention - as it is going to be a bumpy ride for some of our competitors...   Currently we have two offices in Salida, who knows - by the end of the year we may have three.

Goodbye 2011, and WELCOME 2012!!!
 
TB

   

FHA will keep funding flips

by Inman News

For the second year in a row, the Federal Housing Administration is extending a temporary waiver of its "anti-flipping" rule, meaning homebuyers relying on FHA-insured financing will continue to be able to buy homes that have changed hands in the last 90 days.

The waiver is a boon for investors seeking to rehab and flip properties, because it expands the pool of eligible borrowers to include those relying on FHA-backed loans, popular with first-time homebuyers and others who lack the cash to make large down payments.

In extending the waiver through 2012, FHA said all transactions must continue to be arms-length. In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will apply only if the lender can document the justification for the increase in value, FHA said.

FHA instituted the anti-flipping rule in 2003 to protect its mutual mortgage insurance program from losses on homes that were merely flipped, rather than rehabbed. Homes repossessed by Fannie Mae, Freddie Mac, and state and federally chartered financial institutions were exempt from the rule.

In February 2010, the Obama administration waived the waiting period for resales -- including homes purchased and rehabbed by private investors -- in the hopes of stabilizing home prices and revitalizing communities hit by foreclosures.

It often takes less than 90 days to acquire, rehabilitate and sell properties, the Department of Housing and Urban Development said at the time. Some sellers of rehabbed properties had been reluctant to enter into contracts with FHA buyers because of the cost of holding a property for 90 days, HUD said.
In extending the waiver through 2011, FHA said it insured 21,000 90-day property flip loans worth more than $3.6 billion in 2010 that would otherwise not have qualified for financing.

That number has since grown to nearly 42,000 mortgages worth more than $7 billion on properties resold within 90 days of acquisition.

Actions on Housing Policy Will Make or Break Recovery

by Margaret Kelly

We have many reasons to be optimistic about housing. Past-due mortgages and foreclosure filings have been trending down in recent months, not to mention inventory is decreasing, interest rates are lower than ever and home prices are stabilizing. But the progress is fragile, and ongoing recovery won’t be helped by unreasonable regulation. The only appropriate focus for legislators is helping families who are struggling right now and doing whatever it takes to keep properties out of the REO market.

Recent steps to provide distressed homeowners with more viable alternatives to foreclosure, such as easier refinancing through the Home Affordable Refinance Program (HARP), and ongoing streamlining of short sales by major lenders, are important steps in the right direction—and at the right time.

Lawmakers have the power to either continue helping or risk hurting the economy with their decisions on housing. It’s important they hear the message that housing needs focused attention to gain real traction toward sustained recovery, which really is in the best interest of the entire economy. I urge you to contact your representatives to offer your professional opinion on what it’s going to take to make the turnaround stick.

Mission Critical
There’s no more important goal than keeping families in their homes if they have a reasonable ability to pay the mortgage. The Obama administration’s executive order to allow homeowners to refinance their government-backed loans under HARP, regardless of how much value a home has lost in the downturn, sets a great example for other major lenders. And by following suit, the big banks can avoid flooding the market with costly foreclosures and avoid jeopardizing consumer confidence.

More importantly, homeowners who’ve had to cut back in these lean times can save hundreds of dollars a month on their mortgage payments with previously denied access to historically low interest rates.

Next Best Thing
In cases where homeowners have no reasonable ability to pay their mortgage because of unemployment, illness or other personal challenges, a short sale should be the first consideration. Next to lenders needing to continue ramping up their abilities to handle short sales, one of the biggest obstacles to closing these life-changing transactions is educating homeowners about the option. More lenders are being proactive in contacting homeowners who are at risk of default and outlining alternatives to foreclosure, such as short sales. Plus, in many cases, these homeowners are being introduced to one or more trained real estate agents who can help them through the process.

With short sales becoming increasingly commonplace (Bank of America reported recently that its yearly total of short sales has more than doubled since 2009), it’s more important than ever for real estate professionals to promote their expertise in distressed properties and their willingness to help. The key for any agent who’s interested in taking part in the short sale solution is getting appropriate training, such as the Certified Distressed Property Expert (CDPE) designation or the NAR Short Sales and Foreclosure Resource (SFR) certification.

Economists and real estate leaders alike agree that foreclosure alternatives are going to make the difference between needless struggle and real recovery. And as lawmakers and lenders become wiser to this reality and the primary task, refinancing and short sales will play a major role in pulling us out of the current downturn and pronounced cycle of foreclosures.

Margaret Kelly (CRB) is chief executive officer of RE/MAX.

Friday, December 30, 2011

4 predictions about 2012 real estate market

by Tara-Nicholle Nelson

With 2012 nearly upon us, many of us will be spending this week reviewing the events of 2011 and setting resolutions, goals or visions for what we'd like to accomplish next year.

It will come as no surprise that the most common New Year's resolutions fall into the categories of getting organized and getting fit -- physically and financially.

Financial fitness includes getting your real estate business in order. But you can't set up your real estate plans for the year in a vacuum. They must be done in context of what's going on in the market. Here are four predictions about what that market context will look like in the coming year:

1. Even more foreclosures
While I'd like to claim crystal-ball credit for this one, it doesn't take heightened powers of prediction to foresee an uptick in the rate of home repossessions in 2012. Last fall's robo-signing debacle and the ongoing legal fallout from it created a massive backlog in the foreclosure pipeline, meaning that banks are taking many months, even years, to actually foreclose on mortgages in default.

Earlier this year, the New York Times reported that the additional hurdles New York state courts are requiring banks to leap in the wake of the robo-signing revelations, like additional settlement meetings with the homeowner to see if a modification can be brokered, have created a backlog of foreclosures that it would take 62 years to clear, at the current rate of foreclosure.

It's pretty clear that in 2012 and beyond, the banks will work through those backlogs. The inevitable result will be an increase in foreclosures.

2. REOs and short sales will become the new normal
If you even know anyone who has house-hunted in the past couple of years, you've likely heard tales of the high-drama high jinks -- super-long escrows, first-time buyers being bested by investors' cash offers, banks resistant to negotiating for repairs -- that take place in the course of a distressed property sale.

In the coming year, distressed home sales will continue to represent an increasing share of homes on the market. So, buyers will shift from considering whether to buy a short sale to understanding that they must be educated and prepared to do a deal with a seller, a bank (to buy an REO) or a hybrid of the two (to buy a short sale) to access the full selection of homes on the market.

This, in turn, will empower buyers to make smart decisions about what to offer and what to expect on any listing they like, as well as to set smart priorities and make realistic comparisons between listings based on their own personal priorities around timing, certainty and seller flexibility.

3.  So-called 'smart cities' will do well 
This year, a number of housing markets saw double- or even triple-dips in home values. In others, pricing stayed relatively flat. However, in areas where technology powers the economy, home values prospered along with the industry. Silicon Valley real estate, for instance, saw fierce competition among buyers as the young employees of companies that went public like used their newly stocked bank accounts to buy their first homes.

I recently talked with Jed Kolko, chief economist for real estate search site Trulia, and his 2012 forecast was that so-called "smart cities" will continue to have hot real estate markets next year. But Kolko defined smart cities much more broadly than the California tech hubs. Other tech centers like Austin, Texas, and the Massachusetts suburbs of Cambridge, Newton and Framingham all made Kolko's list, as did Rochester, N.Y. (a town known for its highly educated, highly skilled work force).

4. Consumers will get ‘hopeless'
I mean hopeless in the best of all possible ways. For years, buyers and sellers have been waiting for that singular event to occur that would cause a quick market recovery. But 2012 will mark the fifth or sixth year of the real estate recession, depending on who you talk to. I predict that those consumers who have not already done so will drop unrealistic hopes for a fast return to the heady real estate fortunes of the subprime era.  Instead, people will make their real estate plans based on:
  • today's low home prices, rather than the fantasy of what could happen if the market miraculously came back;
  • assumptions of very low, or no, appreciation in home values for years to come; and
  • very conservative estimates of their own finances and how they will grow.
As a result, buyers won't break their necks to hurry and buy before prices uptick; rather, they'll save and plan to buy when it makes the most sense for their finances. Homeowners will do the same; they will either refi, remodel and be content where they are for the long haul, or decide their homes no longer fit their lifestyles and their finances, divest of them and move on. But the good news is, people will make these decisions based on what is or is not sustainable for their lives and their finances, and not based on inflated hopes about what the market will or will not do.

Tara-Nicholle Nelson is author of "The Savvy Woman's Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

For Every Two Homes for Sale, There's One Hiding in the Shadows..

by Carrie Bay

The number of distressed properties not currently listed for sale on multiple listing services (MLSs) stood at 1.6 million as of October 2011, according to CoreLogic.

This shadow inventory is approximately half of the industry’s visible inventory of homes available for sale, CoreLogic says. Thus, for every two homes available for sale, there is one home in the “shadows.”    CoreLogic’s latest shadow inventory assessment represents a supply of five months and is down from October 2010, when shadow inventory stood at 1.9 million units, or 7-months’ supply.

CoreLogic estimates the current stock of properties in the shadow inventory, also known as pending supply, by calculating the number of distressed properties not currently listed on MLSs that are seriously delinquent (90 days or more), in foreclosure, and real estate owned (REO) by lenders.

Of the 1.6 million properties currently in the shadow inventory, 770,000 units are seriously delinquent, 430,000 are in foreclosure, and 370,000 are REO, according to CoreLogic’s report.

Despite 3 million distressed sales since January 2009, a period when home prices were declining at their fastest rate, the shadow inventory in October 2011 is at the same level as January 2009, CoreLogic notes.  Growth in the shadow supply, though, has been reined in by the fact that the flow of new seriously delinquent loans into the shadow inventory has been offset by a roughly equal flow of distressed REO and short sale transactions, the company explained.

Still, the shadow inventory is approximately four times higher than its low point (380,000 properties) at the peak of the housing bubble in mid-2006, CoreLogic says.

The company contends that a healthy housing market should have less than one-month’s supply of shadow inventory, which would be an easily absorbed stock of distressed assets with little or no discernable impact on house prices, unless the inventory was geographically concentrated.

Currently, Florida, California, and Illinois account for more than a third of the shadow inventory, CoreLogic reports. The top six states, which would also include New York, Texas, and New Jersey, are home to half of the shadow inventory.

Thursday, December 29, 2011

Colorado Agent was who found the $10k in Airport and returned it...

by Amanda Okker

As Mitch Gilbert stood in the security line at the Las Vegas airport, he spotted two envelopes that he would later discover held $10,000 cash. 
 
After a two-week search for the rightful owner, the Broker Associate with RE/MAX Masters in Greenwood Village, Colo., deposited the money into a grateful El Paso man's bank account right before Christmas and sparked an international media frenzy. 

Read all the headlines on Google News. A Dec. 26 Associated Press story has been tweeted more than 200 times and recommended by more than 1,000 readers.

"The story's gone completely viral," says Gilbert, whose story first ran on Denver's NBC newscast Christmas Day after another bank customer called the news station. Since then the story has grabbed the attention of CNN, FOX, MSNBC and many other news outlets. Gilbert says he received Facebook messages from people who saw the story in Germany and the United Kingdom. 

"I think there's so much attention because you rarely hear the story of a large sum of money being returned like this," Gilbert says. "Most people would hope to do the right thing, but until it's in your hands you don't know."

Although he wasn't looking for the media attention, the Hall of Fame member is happy to know that his colleagues and clients will see they're working with a stand-up guy. 

Gilbert says he put so much effort into finding the money's rightful owner, because he felt sick to his stomach whenever he thought about being on the opposite end of the story. Immediately upon returning to Denver and discovering just how much money was lost, Gilbert contacted the Las Vegas airport to see if anyone had reported losing it.

"I didn't open the envelopes at the time, but I assumed they contained money – I just never imagined it was so much," Gilbert says. "At first, the airport refused to help me, but my persistence paid off. When I finally was on the phone with the gentleman in El Paso, it felt so good to hear the gratitude in his voice and to reassure him that every penny of his $10,000 was safe."

Wednesday, December 28, 2011

Existing-Home Sales Continue to Climb in November

by National Association of Realtors

Existing-home sales rose again in November and remain above a year ago, according to the National Association of Realtors®. Also released today were periodic benchmark revisions with downward adjustments to sales and inventory data since 2007, led by a decline in for-sale-by-owners.  Although re-benchmarking resulted in lower adjustments to several years of home sales data, the month-to-month characterization of market conditions did not change. There are no changes to home prices or month’s supply.

The latest monthly data shows total existing-home sales1, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 4.0 percent to a seasonally adjusted annual rate of 4.42 million in November from 4.25 million in October, and are 12.2 percent above the 3.94 million-unit pace in November 2010.

Lawrence Yun, NAR chief economist, said more people are taking advantage of the buyer’s market. “Sales reached the highest mark in 10 months and are 34 percent above the cyclical low point in mid-2010 – a genuine sustained sales recovery appears to be developing,” he said. “We’ve seen healthy gains in contract activity, so it looks like more people are realizing the great opportunity that exists in today’s market for buyers with long-term plans.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 3.99 percent in November from 4.07 percent in October; the rate was 4.30 percent in November 2010; records date back to 1971.

NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said housing affordability conditions have set a new record high. “With record low mortgage interest rates and bargain home prices, NAR’s housing affordability index shows that a median-income family can easily afford a median-priced home,” he said.    “With consumer price inflation rising by more than 3 percent this year, consumers are looking to lock-in steady payments by taking out long-term fixed-rate mortgages. However, the problem remains that some financially qualified families who are willing to stay well within their means are being denied the opportunity to buy in today’s market by the overly restrictive mortgage underwriting situation,” Veissi said.

An elevated level of contract failures continues to hold back a broader sales recovery. Contract failures2 were reported by 33 percent of NAR members in November, unchanged from October but notably above a year ago when it was 9 percent.

Contract failures are cancellations caused by declined mortgage applications, failures in loan underwriting from appraised values coming in below the negotiated price, or other problems including lower conforming mortgage loan limits, home inspections and employment losses.

Also released today are benchmark revisions3 to historic existing-home sales. The 2010 benchmark shows there were 4,190,000 existing-home sales last year, a 14.6 percent revision from the previously projected 4,908,000 sales. For the total period of 2007 through 2010, sales and inventory were downwardly revised by 14.3 percent. The revisions are expected to have a minor impact on future revisions to Gross Domestic Product.    “From a consumer’s perspective, only the local market information matters and there are no changes to local multiple listing service (MLS) data or local supply-and-demand balance, or to local home prices,” Yun explained.

A divergence developed over time between sales reported by MLSs and sales determined by a U.S. Census benchmark; the variance began in 2007. Reasons include growth in MLS coverage areas from which sales data is collected, and geographic population shifts. “It appears that about half of the revisions result solely from a decline in for-sale-by-owners (FSBOs), with more sellers turning to Realtors® to market their homes when the market softened. The FSBO market was overwhelmed during the housing downturn, and since most FSBOs are not reported in MLSs, national estimates of existing-home sales began to diverge based on previous assumptions,” Yun said.

NAR consumer survey data in 2000 showed FSBOs accounted for a 16 percent market share, which fell to a record low 9 percent in 2010.

“In essence, Realtors® began to capture a greater market share. In addition to a decline in FSBO transactions, more builders began marketing new properties through real estate brokers that weren’t completely filtered from the existing-home data,” Yun said. “Some property listings on more than one MLS, and issues related to house flipping, also contributed to the downward revisions.” The new independent benchmark was discussed with government agencies and outside housing market experts, and will allow for annual revisions in the future.

Total housing inventory at the end of November fell 5.8 percent to 2.58 million existing homes available for sale, which represents a 7.0-month supply4 at the current sales pace, down from a 7.7-month supply in October. “Since setting a record of 4.04 million in July 2007, inventories have trended down and supplies are moving close to price stabilization levels,” Yun said.

The national median existing-home price5 for all housing types was $164,200 in November, down 3.5 percent from a year ago. Distressed homes – foreclosures and short sales typically sold at deep discounts – accounted for 29 percent of sales in November (19 percent were foreclosures and 10 percent were short sales), compared with 28 percent in October and 33 percent in November 2010.

All-cash sales accounted for 28 percent of purchases in November; they were 29 percent in October and 31 percent in November 2010. Investors make up the bulk of cash transactions.

Investors purchased 19 percent of homes in November, little changed from 18 percent in October and 19 percent in November 2010. First-time buyers accounted for 35 percent of transactions in November, up from 34 percent in October and 32 percent in November 2010.

Single-family home sales rose 4.5 percent to a seasonally adjusted annual rate of 3.95 million in November from 3.78 million in October, and are 12.9 percent above the 3.50 million-unit level in November 2010. The median existing single-family home price was $164,100 in November, down 4.0 percent from a year ago.
Existing condominium and co-op sales were unchanged at a seasonally adjusted annual rate of 470,000 in November and are 6.8 percent higher than the 440,000-unit pace one year ago. The median existing condo price6 was $164,600 in November, which is 0.2 percent below November 2010.

Regionally, existing-home sales in the Northeast jumped 9.8 percent to an annual pace of 560,000 in November and are 7.7 percent above a year ago. The median price in the Northeast was $240,200, which is 0.1 percent below November 2010.

Existing-home sales in the Midwest rose 4.3 percent in November to a level of 960,000 and are 15.7 percent higher than November 2010. The median price in the Midwest was $133,400, down 4.0 percent from a year ago.

In the South, existing-home sales increased 2.4 percent to an annual pace of 1.74 million in November and are 12.3 percent above a year ago. The median price in the South was $143,300, which is 2.1 percent below November 2010.

Existing-home sales in the West rose 3.6 percent to an annual level of 1.16 million in November and are 11.5 percent higher than November 2010. The median price in the West was $195,300, down 8.4 percent below a year ago.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

3 tips for staging your home for sale

by Dian Hymer

Today's buyers are looking for turnkey homes. That is, they want to move right in without having to do a lot of work. Buyers with busy lifestyles pay a premium for listings that are in prime condition. Staging can make the difference between a listing selling or not, the time it takes to sell, and the ultimate sale price.

Sellers who are financially strapped often have a hard time accepting that they'll need to invest in preparing a house for sale even though they may sell for less than they paid. Fix-up costs can mount up; your agent can help you prioritize so that you don't waste money. It's important to keep your goal in mind, which is to sell your house in a difficult market.

Recently, a home in Piedmont, Calif., an affluent city neighboring Oakland, came on the market in "as is" condition. It had been lived in for decades without much upgrading. Although located in a desirable area, the listing was vacant, dark and showed poorly. The sellers refused to do any work to improve its appeal.  After months on the market with no significant interest, the sellers pulled the house off the market and made improvements. The wall-to-wall carpet was pulled up to reveal hardwood floors that were then refinished. Painters lightened the interior and a professional stager was hired to bring in furniture, artwork, house plants and accessories. The listing was put back on the market with a fresh look and sold right away.
 
HOUSE HUNTING TIP: Although listings staged by a good decorator show well and often sell quickly, you don't need to spend a lot to put your home into shape for marketing. Most homeowners have too many personal possessions in their home from a sale standpoint. Decluttering is something most sellers need to do.  This can generate uncomfortable emotional responses. One seller, who was cleaning out the family home of 50 years, found a packet of love letters his father sent to his mother. Of course, he had to read all of them, which delayed his fix-up schedule.

Consider hiring someone to help you sort, pack, donate and recycle items that you no longer want. You may be able to take a tax deduction for things you donate. Make sure to get a receipt. Your real estate agent should be able to recommend someone who can help you clear your house of clutter if you are overwhelmed by the project.

Your agent, or stager, may ask you to put away collections of art, personal photos, etc. This can be difficult for most sellers because, for them, it's part of the emotional appeal of their home. Your house won't look like your home after you've removed personal possessions and moved what's left around to display the house to its best advantage.

That's the point of the preparation process. You don't want prospective buyers focusing in on your personal property; you want them to focus on the house. Keep in mind that how you live in your home and how it should look when it goes on the market are not the same.

Some sellers complain that their house looks too stark without all their possessions. Even so, it helps you to detach yourself emotionally from the property. Also, less personal property usually gives homes a more spacious feel. When buyers are looking for the most for their money, bigger is usually better.

To close the deal, a listing should be spotless and inviting. Bring in new house plants to put in strategic locations, like orchids in the bathrooms. In dark spots that need a dash of warmth and color, use bromeliads.

THE CLOSING: If you can't pull this together yourself, or with the help or your agent, hire a good stager for a consultation or a proposal for full or partial staging.

Sunday, December 25, 2011

Seller Financing - Impact of the Safe Act and the Dodd-Frank Act

by National Association of Realtors

EXECUTIVE SUMMARY
Seller financing plays an important role in financing the sale of real estate, especially when credit is tight. This paper summarizes the impact of two federal laws that affect seller financing. On July 30, 2008, President George W. Bush signed into law the Secure and Fair Enforcement for Mortgage Licensing Act (the SAFE Act). The SAFE Act requires licensing or registration of loan originators. On July 21, 2010, President Barack Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act or DFA). The Dodd-Frank Act restructures the oversight of financial regulation and includes amendments to the Truth in Lending Act (TILA). Both of these laws will affect seller financing, except to the extent exempted.

SAFE Act. Licensing of loan originators under state laws enacted pursuant to the SAFE Act and meeting minimum federal requirements is already required. The HUD website has information about the SAFE Act. HUD has published a final rule establishing minimum federal standards that requires licensing of individuals who engage in the business of a loan originator. An individual engages in the business of a loan originator if the individual, in a commercial context and habitually or repeatedly, takes a residential mortgage loan application and offers or negotiates terms of a residential mortgage loan for compensation or gain. HUD’s overall responsibility for interpretation, implementation, and compliance transferred to the Consumer Financial Protection Bureau (CFPB) on July 21, 2011. The law exempts those who only perform real estate brokerage activities unless compensated by a lender, mortgage broker, or other loan originator (or their agent). Unless brokers/agents engage in the business of a loan originator, they do not have to be licensed as loan originators.

Dodd-Frank Act. Title XIV of the DFA adds a new section 129C to TILA stating that no creditor may make a mortgage loan without making a reasonable or good faith determination that the customer has the ability to repay the loan. The term creditor, for purposes of this ability-to-repay requirement, is a person who “regularly extends” consumer credit, which is defined as more than 5 times in a calendar year. This means that many seller financers are exempt from section 129C.

The Federal Reserve Board published a proposed rule to implement the ability-to-repay requirements on May 11, 2011. NAR submitted its comments on July 22, 2011. Authority for future rulemaking, including the final rule for this provision, transferred to the CFPB on July 21, 2011. Title XIV will not take effect until final regulations to be issued by the CFPB go into effect. The CFPB has until January 21, 2013, to issue the final regulations, and they must take effect no later than 12 months after their issuance. If CFPB misses the deadline, Title XIV takes effect anyway on January 21, 2013.

The DFA definition of mortgage originator exempts an individual, estate, or trust that provides mortgage financing for no more than 3 properties in any 12 month period, but only if the financing meets certain rules. There is uncertainty whether the inflexible seller financing exemption from the definition of mortgage originator will be significant since it doesn’t apply to the main ability-to-repay requirement and it isn’t clear what it does apply to. NAR will continue to seek to minimize limits on seller financing.

DETAILED SUMMARY SAFE ACT
As described by HUD, the SAFE Act was promulgated “…to enhance consumer protection and reduce fraud by directing states to adopt minimum uniform standards for the licensing and registration of residential mortgage loan originators and to participate in a nationwide mortgage licensing system and registry database of residential mortgage loan originators.”

The SAFE Act requires states to establish loan originator licensing requirements that meet minimum requirements with respect to residential mortgage loans made primarily for personal, family or household use. Loan originators who are employees of banks are subject to less onerous registration requirements. To give states an extremely strong incentive to participate, the SAFE Act gives HUD authority to establish a back-up licensing system for any states whose requirements do not meet minimum SAFE Act requirements or do not participate in the Nationwide Mortgage Licensing System and Registry (NMLSR). All states have enacted legislation requiring licensing through NMLSR administered by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR).

The SAFE Act does not explicitly exempt individuals who choose to finance the sale of residential property they own (often referred to as seller financing), but HUD’s final rule only requires licensing for individuals selling their own property, or other property, if they are engaged in the business of a residential mortgage loan originator. The final rule clarifies that an individual engages in the business of a loan originator if the individual, in a commercial context and habitually or repeatedly:

(1)(i) takes a residential mortgage loan application; and (ii) Offers or negotiates terms of a residential mortgage loan for compensation or gain; or
(2) represents to the public, through advertising or other means of communicating or providing information (including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items), that such individual can or will perform the activities described in (1).

The law exempts those who only perform real estate brokerage activities unless compensated by a lender, mortgage broker, or other loan originator (or their agent) and they engage in the business of a loan originator.

SAFE Act Exemptions
Though HUD states that it lacks statutory authority to grant exemptions to licensing under the SAFE Act, it does make a distinction between individuals who meet the definition of “loan originator” versus those individuals who “engage in the business” of a loan originator. Of particular interest to real estate professionals are the following examples.

 HUD advises that, “absent evidence to the contrary, the sale and financing the sale of one’s own residence, vacation home or property, or inherited property” is not likely to be considered to be engaging in the business of a loan originator.
 Brokers/agents rarely, if ever, take an application or offer to negotiate terms of a residential mortgage loan for REO transactions and typically would not have to be licensed as loan originators in these transactions.
 To trigger the licensing requirements under the SAFE Act, the financing must be primarily for personal, family, or household use. This means that real estate owners selling property to someone who intends to use the property as a rental investment property are exempt, and investors selling non-residential property with seller financing are also exempt.
 Land sold for development is excluded from the kinds of seller financing affected by the SAFE Act. The Act requires licensing with respect to the sale of land only if the loan is primarily for personal, family, or household use, only if there is intent to construct a residence on the land, and only if the seller is engaged in the business of a loan originator.
 If the financing is for business purposes, SAFE Act licensing requirements do not apply.
 A seller financing the sale of his or her own property completely avoids the issue of licensing by retaining the services of a licensed loan originator and having that individual carry out the function that constitute engaging in the business of a loan originator.

Here are several examples of who is not exempt:
 Individuals (including real estate professionals) are not exempt if they do engage in the business of a loan originator because they provide financing habitually and repeatedly. HUD chose not to decide how frequently an individual may provide financing before reaching the requisite degree of habitualness. NAR thinks that the CFPB will likely defer to reasonable state laws on the number of seller financing transactions that would require licensing, and NAR will continue to monitor any further guidance.
 Individuals who provide financing for a property they do not own are required to be licensed only if they engage in the business of a loan originator. In other words, anyone who wants to provide financing for a residential property to a buyer who will use the property for personal, family or household uses is required to be licensed under the SAFE Act only if they engage in the business of a loan originator.

Activity at the State Level
The SAFE Act required each state to develop and promulgate its own law that meets the minimum requirements of the federal SAFE Act, no later than July 31, 2010. All states have now enacted their own loan originator licensing laws. Everyone potentially affected by the SAFE Act should check out their state requirements which may have stricter requirements than the federal law.

While the SAFE Act imposes new requirements on the licensing and registration of loan originators, states have interpreted the applicability to seller financing differently. A few states have enacted no exemption for seller financing—even for the sale of the seller’s own residence. Others states explicitly exempt seller financing from licensing requirements. Some exempt seller financing if they finance fewer than a certain number of sales within a specified period. At least one state reportedly believes that seller financing is an installment sale not subject to the SAFE Act at all, but HUD has specifically stated that is incorrect. HUD chose not to decide how frequently an individual may provide financing before reaching the requisite degree of habitualness. NAR will continue to monitor any additional guidance, but expects CFPB to defer to reasonable state laws on the number of seller financing transactions that would trigger licensing.

DODD-FRANK ACT (DFA)
Title XIV of the DFA states that no creditor may make a mortgage loan without making a reasonable or good faith determination that the customer has the ability to repay the loan. The term creditor, for purposes of this ability-to-repay requirement, is a person who “regularly extends” consumer credit, which is defined as more than 5 times in a calendar year. Creditors, not mortgage originators (see below), are subject to the ability-to-repay requirements.

The Federal Reserve Board published a proposed rule to implement the ability-to-repay requirements on May 11, 2011. NAR submitted its comments on the July 22, 2011. Authority for future rulemaking, including the final rule for this provision, transferred to the CFPB on July 21, 2011. Title XIV will not take effect until final regulations to be issued by the CFPB go into effect. The CFPB has until January 21, 2013, to issue the final regulations, and they must take effect no later than 12 months after their issuance. If CFPB misses the deadline, Title XIV takes effect anyway on January 21, 2013.

The Dodd-Frank Act definition of “mortgage originator” exempts an individual, estate, or trust that provides mortgage financing for no more than 3 properties in any 12 month period from certain requirements of Title XIV, but only if the financing meets certain criteria:

 The seller did not construct the home to which the financing is being applied.
 The loan is fully amortizing (no balloon mortgages allowed).
 The seller determines in good faith and documents that the buyer has a reasonable ability to repay the loan. This provision appears to differ from the section 129C ability-to-repay requirements.
 The loan has a fixed rate or is adjustable after 5 or more years, subject to reasonable annual and lifetime caps.
 The loan meets other criteria set by the Federal Reserve Board.

NAR’s comment letter observes that seller financing is only subject to the section 129C ability-to-repay requirements if the seller provides financing more than five times in a calendar year and, therefore, would be considered a creditor. The term mortgage originator, which includes an exemption for seller financing described above, is used in a section (entitled “Prohibition on Steering Incentives”) designed to prohibit certain compensation paid to mortgage originators to prevent steering in the context of preventing abuses where some originators were paid more for arranging for loans that were disadvantageous to the consumer.

Seller financing, of course, does not involve compensation paid by third parties, and NAR believes it should not be subject to the compensation and steering rules. To the extent the CFPB determines any requirements apply to mortgage originators engaged in seller financing, the NAR letter asks CFPB to use its broad statutory authority under TILA to make the exclusion practicable by allowing a balloon mortgage in some circumstances and to streamline any ability-to-repay determination that may apply.

Friday, December 23, 2011

Mortgage Fees Would Rise Under Payroll Tax Cut Deal

by Terry Brown (with help from Fox News)


Homebuyers, beware. 

In exchange for a two-month tax cut, the Senate on Saturday approved a permanent increase in fees attached to mortgages backed by Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA). 

The fee hike would apply to new mortgages and new refinances, and would last for the life of the loans.   The increase is meant to pay for the roughly $33 billion package the Senate approved Saturday to extend a 2 percentage point payroll tax cut for another two months. The Obama administration says 160 million people benefit from that tax cut. 

But the mortgage fee provision would have widespread long-term impact, considering nine out of 10 mortgages go through one of the three government-sponsored finance organizations affected. 

The new fee increase would amount to about $15 a month more for a $200,000 mortgage, according to a senior Democratic official.  

That's $180 a year, or $360 a year for a $400,000 mortgage. Homeowners would have the fee hike built into their loan -- the mortgage provider would then send that extra revenue to the Treasury.    This would hurt some buyers ability to get qualified.     The idea behind the fee is to encourage more homeowners to get into the private market, as opposed to seeking loans backed by troubled entities like Fannie and Freddie. 

"Taxpayers are losing every quarter on Fannie and Freddie," a senior Senate Democratic aide said. "We want to lessen the burden on the taxpayers (who are on the hook for failed government-backed loans)."   The aide added, "This is an incentive to go to the private-sector mortgage market." 

A fact sheet on the Senate bill sent out Saturday to House Republicans noted that the offset has "bipartisan support" and was included in the House GOP-backed payroll tax cut bill. It also was included in President Obama's list of suggestions to the now-defunct "Super Committee" tasked with reducing the deficit. 

The House still must vote on the bill. The two-month tax cut is estimated to be worth about $165 for someone making $50,000 a year. 

While lawmakers will say that the mortgage fee hike means the payroll tax cut is fully paid for, the timetables for the tax cut itself and the revenue from the fee are very different. 

The Congressional Budget Office estimates that while the tax cut lasts two months, it will take 10 years for the associated fee hike to drum up an estimated $35.7 billion and replenish the lost revenue. That rhetorical tactic is common on Capitol Hill -- lawmakers frequently say bills are "paid for" when in fact it takes a decade for that to be the case.

10 YEARS TO REPAY 2 MONTHS!

Texas existing home sales rise 9%

by KERRI PANCHUK

Existing single-family home sales in Texas rose 9% from a year ago in November, the Real Estate Center at Texas A&M University said in a report Monday.

The real estate research center found that 15,000 homes sold statewide, with the median home price hitting $147,600. That is up 1% from November 2010 levels.

The state's inventory level currently sits at a 6.6-month supply.

Home sales in Dallas and Houston rose 16% and 11%, respectively, from last November, suggesting more robust activity in those metropolitan areas. The median home price in Dallas declined though, dropping 2% to $151,100 from last November. Houston prices remained more robust, growing 2% from 2010 to $153,800.

Other areas experiencing price increases included Abilene, Arlington, Austin, Longview-Marshall, Lubbock and McAllen. In Abilene alone, median home prices increased 47% over a year ago.

Prices declined year-over-year in Amarillo, Bryan-College Station, Laredo, Odessa, San Antonio and Texarkana.

Thursday, December 22, 2011

Home remodeling activity continues record rise: BuildFax

by JUSTIN T. HILLEY

The BuildFax residential remodeling index reached a record high in October, extending its 23-month climb another month, as homeowners opt to stay put and remodel rather than buy a new home.

The index, which began in 2004, rose to 147.6, up 40% from 105.8 in October 2010. The index stood at 141.4 in September, which was also a high.   "The economy is returning in respect to people investing in their own housing — not in terms of dollars, but in terms of individuals in the U.S.," Joe Emison, vice president of research and development at BuildFax, told HousingWire. "What we are seeing is that people who might have bought a new house before are no longer doing so because they can't, and that energy is being channeled into remodeling."

Emison said while the number of remodeling projects is rising, the average estimated construction cost of each project is falling.   "We see that as an indication that people are doing more comfort remodels, meaning they're modeling to make their homes more comfortable as opposed to flipping it," he said.

The company found the average project cost of a major remodeling project for 2011 was $39,460, down from an index high of $43,808 in 2004. The average project cost of a minor remodeling project in 2011 was $10,968, down from an index high of $12,623 in 2006.

BuildFax's data reveals continued month-over-month gains for most regions of the country as consumers invest in remodeling in the face of growing fears of a double-dip recession and an unemployment rate that stands at 8.9%.

In October, the West (53.6 points; 52.5%), the Midwest (21.4 points; 20.2%) and the South (9.5 points; 10.6%) experienced year-over-year gains from October 2010. The West (9.6 points; 6.8%), the Midwest (7.6 points; 6.2%), the Northeast (1.2 points; 1.6%) and the South (.4 points; 0.4%) had month-over-month gains. The Northeast dropped 3.5 points (4.5%).
 
The BFRI tracks remodeling activity via building permit activity filed with local building departments across the country.

Wednesday, December 21, 2011

Investors should expect modest returns throughout 2012

by JUSTIN T. HILLEY

Investors should expect modest returns in 2012 as a result of anemic global economic growth and weakening consumer spending, according to a Bank of America Merrill Lynch (BAC: 4.985 -4.13%) report released Thursday.

Considering a looming recession in Europe, a still-struggling U.S. economy, high oil prices and slower growth in China, BofA Merrill Lynch analysts forecast global economic growth of about 3.5% next year.

"The global economy can weather a normal size recession in Europe, in our opinion," said Ethan Harris, co-head of the bank's Global Economics Research. "The U.S. faces its own challenges, with gradual fiscal tightening and considerable uncertainty around policy after the election. As a result, while we expect solid 3% gross domestic product growth in the current quarter, we look for growth to slow to just 1% by the end of 2012."

Moody's Analytics expects U.S. GDP growth of 2.6% in 2012, an estimate they say is contingent on European debt concerns and domestic policy. They see American unemployment, which is currently stands at 8.9%, remaining high in 2012, while interest rates and inflation remain low.

BofA Merrill Lynch analysts expect Europe to see a mild recession, while emerging market economies will see growth of 5 to 6%. Asia should remain the most resilient with growth of 7.1% and Latin America should see growth of 3.3%.

Last month, a BofA Merrill Lynch survey found that global investors are turning to U.S. and emerging market equities to escape Eurozone troubles.   "The very real risk of policy mistakes causing a recession in the U.S. or a hard landing in China means that investors should conservatively allocate assets in 2012," said Michael Hartnett, the bank's chief global equity strategist.

Despite their short-term caution, analysts expect global equities to rally by 10% next year from current levels, aided by liquidity, modest earnings growth and cheap valuations. "In a bullish scenario, 2012 could represent the beginning of the end of the great bear market in equities," analysts said.

And once again, U.S. consumers will weaken. The bank's U.S. economics group expects the recent momentum from consumer spending to subside in coming quarters without stronger jobs creation or wage growth. Consumer de-leveraging will remain a drag on the U.S. economy in 2012.

Financial services firm Keefe, Bruyette & Woods said this week that even if home prices and household leverage stabilize next year, consumers' mortgage debt will continue to contract over the next several years because of high credit losses.

Tuesday, December 20, 2011

BofAML: FHA probably won't require bailout

by JUSTIN T. HILLEY

Home prices will most likely decline a little more than 2% next year, suggesting the Federal Housing Administration will not require a Treasury bailout, according to analysts at Bank of America Merrill Lynch. Some folks in Washington and academia claim a bailout is inevitable.

Analysts noted the FHA's estimation that a 4% to 5% decline in home prices by the end of 2012 could force it to empty its insurance fund, which the agency uses to pay lenders when a borrower defaults. The FHA has the authority to raise premiums to guard against a draining of the fund and worries that it will need a bailout.

JP Morgan Chase (JPM: 30.70 -3.73%) analysts recently said if existing home sales fail to reach the 5.5 million level next year, the nation could be looking at another 5% decline in home prices in 2012. Overall, by the end of 2011, home prices will drop 3% this year and are expected to fall another 1.6% in 2012, according to Chase.

The FHA doubts a bailout will occur.

"The simplest way around a potential bailout would be to increase revenues into the (insurance) fund through an increase in mortgage insurance premiums," BofAML analysts said. "Further increases could easily be justified while the overall performance of the book is in the red."

The Department of Housing and Urban Development earlier this month revealed that it is considering increasing premiums on FHA-insured mortgages after weeks of FHA official denials. The increase would further reduce prepayment speeds as FHA borrowers face a decreased incentive to refinance.

In November, the FHA released its annual report to Congress on the state of the fund. The report stated the fund's capital ratio, a measure of its ability to pay future claims, will rise above the federally mandated minimum of 2% by 2014. The ratio now sits at 0.24%.   "Although the long-term forecast is positive, the fund remains susceptible to risk if housing continues to slide," analysts said.

Credit performance of FHA-backed loans mirrors the results seen in agency pools, they said, and fundamentals are stronger for new loans than for those originated a few years back. For example, the average credit score of newly issued Ginnie Mae-backed loans is now more than 700, and early payment default rates have dropped below 0.4% after topping out north of 2% with pre-2009 borrowers.

Ginnie Mae guarantees the timely payment of principal and interest to investors who own residential mortgage-backed securities backed by pools of FHA-insured loans.

The improved credit performance has impacted FHA's bottom line, as well. The value of its guarantee book, which reached negative 9% of the underlying loan value in 2007, now stands at more than 5% of loan volume.

Despite the recent improvement, payouts to cover losses outpaced the revenue from insurance premiums and property liquidations in 2011, taking the excess reserves down by $2 billion and below the statutory minimum of 2%.

Home sales up for fifth-straight month

by JON PRIOR

November home sales in the 53 largest metro areas rose 8.1% from last year, the fifth-straight month of increases from a year earlier, according to the real estate network RE/MAX.

Sales did fall 5.7% from the previous month, following a seasonal trend. The inventory of homes on the market dropped for the 17th straight month. Inventory is down 23.7% from last year.

Given the rate of sales, the national market currently holds a 7.8-month supply of homes, which is down from a 10-month supply last year. A market balanced by sellers and buyers usually holds a six-month inventory.  "This market is trying hard to stabilize itself with home sales significantly stronger than one year ago, even though we are entering the holiday season when sales traditionally decline," said Margaret Kelly, CEO of RE/MAX.

Home sales increased 31% in New Orleans, the most of the 41 metros that saw gains. With sales trending higher, Kelly expects prices to follow. Most banking analysts forecast prices to find a bottom sometime in 2012 before heading back up.

The median sales price of homes sold in November was $181,322, up 1.4% from the month before but down 4.2% from last year, according to RE/MAX. Only nine of the 53 metros showed increases from November 2010 led by two cities in Florida. In Orlando, prices climbed 8.5% followed by a 6.1% increase in Miami.

Salida Commercial Properties HOT for 2011

by Terry Brown

According to MLS data as of Dec 19, 2011 there were 17 Commercial/Business properties sold within Salida thus far in the past 12 months at a total value of $6,029,888.    Average days on the market (DOM) was 191 days.

However, the same period from 2009-2010 there were only 10 such properties/businesses sold at a value of $3,692,000 with average DOM at a whopping 347 days!   This is a 63% gain over the year before in sales volume, and 44% less DOM.

Commercial properties this year sold at 84% of asking price, vs 88% a year earlier.

There are currently 68 Commercial/Business properties for sale, and since the average monthly sales rate of this category is 1.42 sold each month, we have 48 months of such inventory - or FOUR years before everything will eventually sell (at the current absorption rate).

Monday, December 19, 2011

Denver Luxury Homes Sales up in November

by Brian Petrelli

Some more good news came out today on the market for Denver Luxury Homes and Denver Luxury Foreclosures. The Denver Business Journal is reporting that sales of $1 million and up increased by over 20% this November from last November.

The statistics cover the entire Denver metro area and represent both Denver Luxury Homes and condos. The article and the underlying statistics are interesting and worth a look if your considering a higher end home in the Denver area. We've seen these trends repeating themselves in all price points and while we're not seeing a huge uptick in pricing, the market is moving in a positive direction.

From The Denver Business Journal:

Forty-five local homes with a price tag of more than $1 million sold in November, up eight from the 37 sold in October and up one from November 2010, the report shows.

A similar report from independent Littleton broker Gary Bauer using Metrolist data shows an inventory of 650 residential homes listed for more than $1 million in November, and 74 condos.

New Absorption Rate for Salida Real Estate

by Terry Brown

"Absorption Rate" is a term used in the Real Estate industry to reflect the amount of property listed for sale vs how many will likely sell in the future - with the math coming from previous sales in a certain market.   In other words, "the rate of properties that will be absorbed in the market in future months = absorption rate"... 

As of today, Dec 19th, the absorption rate for Residential homes within Salida is 8.42 per month, or 8.42 homes are selling on average every month within Salida.    Since today there are 98 residential homes listed on the MLS, that means the inventory of residential homes for sale is 11.6 months - obviously a Buyers market.   NOTE:   These figures do not include Residential Homes with Acreage or any other locations within our MLS area.  However, that number has came down since August when the inventory was at 14.1 months.    This is good that the inventory is falling, however, a healthy market is a 6 month supply.  More than 6 months is a Buyers market, less than 6 months is a Sellers market.

If you are interviewing a Realtor and they don't know what how many properties are for sale in your market or what the absorption rate is - RUN - you have just met a Realtor that doesn't understand the market and they will unlikely be able to setup a logical marketing program for your property if they don't know what is selling or how many properties you will be competing against...    Understand this:   Your Property is going to be COMPETING against all of the other properties on the market - and the best value wins (or sells...).    Pricing is everything - not low pricing, but CORRECT pricing.   

    

Business / Broadband Access Issue Summary

by Terry Brown (plus credit to NAR website)


I've been in several countries over the past few years and it is amazing how slow our internet connections are in comparison to them.    While Phone companies are now launching 4G service here, when I was in London a few years ago when we were just launching 3G in America, they were launching 8G.    Yep - that far ahead of us.   Why?   Bandwidth.    Sure, we can install the same equipment as they do and have the same speeds, only faster services means more data - and more data is bandwidth.    American's currently use more bandwidth that other countries, thus we cannot "handle" faster internet speeds because we run out of bandwidth quickly.     The only way to solve this is to either send up more satellites or install more antennas on towers - or maybe install more towers.   However, the cheapest way to solve bandwidth problems is to only offer limited bandwidth per hookup - which includes smart phones and regular internet connections.   Basically, what they have installed is the same thing as a "governer" on a go-cart or mini-bike - to restrict how fast it can go.    They don't have such electronic devices overseas, or if they do - they have them set much higher than in the USA.

What is the fundamental issue?
The term “broadband” is used to describe high speed Internet access provided by various technology platforms including cable, telephone wire, and wireless technologies. Broadband gives users the ability to send and receive data at volumes and speeds far greater than “dial-up” Internet access provided over traditional telephone lines. While the numbers of new broadband subscribers continue to grow, a new report from the FCC estimates that between 14 and 24 million Americans still lack access to broadband internet service. Moreover, several international rankings indicate that the U.S. is lagging behind other nations in broadband accessibility, speed and cost.

Americans pay more and get less for broadband service than many countries across the globe. Realtors® support a comprehensive national policy to stimulate the deployment of broadband in underserved areas of the U.S., increase data speeds and lower broadband prices.

I am a real estate professional. What does this mean for my business?
Realtors® support policies to encourage the growth of strong viable communities.   A national broadband policy will promote economic growth and expand opportunities for home sales. A recent study concluded that in communities where there is access to high speed internet, property values are 6% higher. Communities prosper when they gain access to high-speed Internet. Property values increase, businesses grow and jobs are created. Broadband forms the infrastructure for the American economy’s digital future. Affordable high-speed broadband will soon become almost as important as water and electricity, and the absence of broadband makes a community a less attractive location for new investment and development. Furthermore, availability of “new economy” jobs is impossible in a community with little or no broadband access.

Those properties in rural areas, such as in Chaffee County, only restricts the buyers who MUST live near high speed internet.    As a satellite user myself, let me tell you - satellite internet doesn't cut it.   There are many, many people who work at home online and would love to move to our great county, but they cannot gain access to reliable Broadband.

National Association of Realtors (NAR)  Policy:
NAR supports the following Broadband Access Principles:
  • Every American should have access to a high-speed, world-class communications infrastructure
  • High-capacity broadband connectivity should be affordable and widely accessible
  • A variety of options should be considered to encourage quality broadband deployment and adoption including action by the public and private sector.

Legislative/Regulatory Status/Outlook
In March, the FCC delivered to Congress its National Broadband Plan. The cornerstone of the Plan is a pledge to connect 100 million households to affordable 100-megabits-per-second broadband service over the next ten years.   (NOTE:  Currently Chaffee County has 20meg download speeds only in select areas - otherwise you can get 6meg download speed via Satellite)

Congress is now considering a number of proposals that would all contribute to increased broadband adoption. One measure aims to improve and modernize the USF (a fund created by an 11.4 percent surcharge on phone bills that is used to subsidizes rural and high-cost telephone service) to apply to rural broadband access. Other measures aim to increase access to wireless spectrum in order to increase the availability of mobile broadband.

Current Legislation/Regulation (bill number or regulation)
Legislative Contact(s):
Melanie Wyne, mwyne@realtors.org, 202-383-1234
Samuel Whitfield, swhitfield@realtors.org, 202-383-1131
Regulatory Contact(s):
Melanie Wyne, mwyne@realtors.org, 202-383-1234

Wednesday, December 14, 2011

Mortgage Default Risk Edging Toward 'Normalcy'

by Carrie Bay

Lenders and investors should expect defaults on mortgage loans currently being originated to be 31 percent higher than the average of loans originated in the 1990s, according to a new report from University Financial Associates (UFA).

The UFA Default Risk Index for the fourth quarter of 2011 edged lower to 131 from last quarter’s revised 133. The index’s baseline of 100 correlates to the default risk of loans made during the 1990s.   As a point of comparison, UFA’s index reading measuring the risk associated with mortgage default was 141 as recently as the first quarter of this year. For what UFA says were the worst vintages of this cycle (2006-2008), the default index soared above 225.

UFA says its Default Risk Index finds that residential mortgage default and prepayment risks are continuing their return to normalcy.

“Despite continuing high unemployment and the threat of contagion from Europe, our Default Risk Index has improved,” said Dennis Capozza, who is the Dale Dykema professor of business administration in the Ross School of Business at the University of Michigan, and a founding principal of Ann Arbor, Michigan-based UFA.

“With consumer balance sheets improving and mortgage rates at record lows, the stage is set for a recovery in the housing market, for which lenders and investors may do well to prepare. We await the catalyst,” Capozza said.

The UFA Default Risk Index measures the risk of default on newly originated prime and nonprime mortgages. UFA’s analysis is based on a “constant-quality” loan, that is, a loan with the same borrower, loan, and collateral characteristics.

Each quarter, UFA evaluates economic conditions in the United States and assesses how these conditions will impact future mortgage defaults, prepayments, loss recoveries, and loan values.

The index reflects only the changes in current and expected future economic conditions, which the company says “are much less favorable currently than in prior years.” UFA’s current assessment has GDP growing just above trend for the next two years and at trend thereafter, but does not envision another recession.

Tuesday, December 13, 2011

Start the Holiday Rush: Home Energy Tax Credits Expire Dec. 31

by Melissa Tracey

Spread the word this holiday season to your clients: They only have a few more days left in the month to take advantage of tax credits for energy efficiency home improvements–so ’tis the season to upgrade!

Tax credits up to $500 are available for home owner’s to claim until the end of the year, but they better hurry. Congress has yet to renew the tax credits for 2012.

“Making efficiency improvements this year will lower home energy bills and improve home comfort for years to come, while also reducing 2011 federal income tax bills,” Kateri Callahan, president of the Alliance to Save Energy, said in a statement.

The allowance for the tax credits that home owners may be eligible for include:
  • $300 for electric heat pump water heaters, electric heat pumps, central air conditioners, biomass stoves, and natural gas, propane, or oil water heaters.
  • $150 for natural gas, propane, oil furnace, or hot water boilers.
  • $50 for advanced main air circulating fans.
  • 10% of the cost of insulation and sealing materials, exterior doors and certain types of energy efficient roofs.
  • 10% of the cost, up to $200, of exterior windows or skylights.
For more information about applying for these tax credits and what projects are eligible, visit the Alliance to Save Energy web site.

Monday, December 12, 2011

Short on real estate down payment? Use your IRA

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With the much stricter loan qualification standards in effect today compared to times past, borrowers are often required to put down at least 20 percent of the purchase price to obtain a home loan. There are lots of people who would like to purchase a home in these times of low interest rates but can't come up with the down payment.

Fortunately, first-time homebuyers who have IRAs (individual retirement accounts) may have more money available for a down payment than they realize. Ordinarily, the money in an IRA can't be withdrawn before age 59.5 without incurring a 10 percent income tax penalty.
However, there is a special exemption for first-time homebuyers. They can withdraw up to $10,000 in IRA funds to purchase a first home without paying the penalty. A married couple can each withdraw $10,000, giving a total of $20,000.

Are taxes due on the withdrawal?
Whenever money is withdrawn from a traditional IRA, it must be reported as income and regular income tax paid on it. This applies to withdrawals for buying a first home. However, this rule does not apply to Roth IRAs.

Like traditional IRAs, Roth IRAs are tax deferred. Unlike traditional IRAs, however, contributions to Roth IRAs are not tax deductible. Instead, withdrawals are tax free after age 59.5.   So long as the Roth IRA has been in existence for at least five years, withdrawals up to $10,000 for a first-time home purchase are completely tax free -- neither income tax nor a penalty tax need be paid.   However, if the Roth IRA is less than 5 years old, income taxes may have to be paid on the withdrawal, but no penalty tax.

Who is a first-time homebuyer?
The good news is that a person can qualify as a first-time homebuyer for these purposes even if he or she has owned homes in the past. For IRA purposes, you're a first-time homebuyer so long as you, or your spouse, did own a principal residence at any time during the previous two years.

The two years are measured from the time the new home is acquired. This is the date a binding sales contract is signed or building or rebuilding has begun.

What can the money be used for?
The IRA withdrawal can be used to help pay for any costs involved in buying, building, or rebuilding a home. It may also be used for reasonable settlement, financing, or other closing costs.

Moreover, the money can be given to a child, grandchild, parent, or other ancestor to buy a first home so long as that individual qualifies under the rules.

The money must be used to pay these costs within 120 days after it is withdrawn from the IRA account. If the home purchase is canceled or delayed, no taxes will be due so long as the money is put back into the account within 120 days of its withdrawal.

Stephen Fishman is a tax expert, attorney and author who has published 18 books, including "Working for Yourself: Law & Taxes for Contractors, Freelancers and Consultants," "Deduct It," "Working as an Independent Contractor," and "Working with Independent Contractors."

Sunday, December 11, 2011

Four Foreclosure Financing Myths

by Peter G. Miller and Daren Blomquist

The word is out: it’s harder to get a mortgage, maybe impossible. Lenders are clamping down, particularly on financing for foreclosure purchases. Just about everyone says so. Since this is a “fact” why bother to buy real estate when you can't get financing?

Well, maybe not a fact. Maybe tales of mortgage woes are exaggerated. Or, maybe they're not true at all. To illustrate, below are four commonly believed myths about financing (particularly foreclosures) that simply aren't true.


Myth #1: Most buyers use cash, not financing
The National Association of Realtors reports that existing home sales in July were running at an annualized rate of 4.7 million per year. About 29 percent were all-cash deals, meaning some 3.3 million properties will be financed this year. That's a lot of people who somehow are using the mortgage system.

Mortgage bankers are making loans — and big profits when they do. Profits per mortgage in the second quarter reached $575, up from $346 per loan in the first quarter, according to the Mortgage Bankers Association.

Of course, if mortgage bankers don't make loans they don't collect that $575 per successful borrower, reason enough to encourage all possible applications.
How to find foreclosures with favorable financing.

Myth # 2: Qualifying for a home loan is tougher than ever
There's no doubt that the mortgage application process has changed in the past year. Whether it's gotten “tougher” depends on the comparison being made.

If we compare today's underwriting standards with the joyous and carefree period from 2002 through 2006 then yes, you bet loan applications have gotten tougher. However, if we compare today's process with loan requirements in the 1990s; underwriting standards for Federal Housing Administration (FHA) and U.S. Department of Veterans Affairs (VA)  loans; or the loan requirements typically set out by community banks, credit unions or small S&Ls then no, lender demands have been fairly consistent.

So what's happened? Why has lending gone back to the good-old-days of fat loan files and lots of verifications? 

Wall Street Reform has given lenders a choice: They can originate option ARMs and allow borrowers to apply for financing with a no-doc loan application — but only if they're willing to set aside 5 percent of the loan amount in a reserve and expose themselves to the possibility of borrower lawsuits. Or, they can make loans without the reserve requirements or liability if they simply originate mortgages within the safe harbor created by the new rules.

Loans within the safe harbor are called “QRMs” or qualified residential mortgages. QRMs include FHA, VA and conventional financing — in other words, sane and safe mortgages without “gotcha” clauses.

The “new” loan standards required under Wall Street Reform are hardly outlandish. For instance:
  • The lender must show that the borrower has an ability to repay the loan based on current income.
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  • The lender must verify borrower income claims with tax returns, W-2s, etc.
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  • The lender must verify the borrower's employment.
None of this stuff is new to anyone who has applied for a VA or FHA loan. Or, for that matter, borrowers who have insisted on using a fully documented loan application.

Huh? Why would anyone voluntarily want to use a full-docs loan application when you could get a stated-income loan (SIL) with a lot less paperwork and hassle?

The answer is money. As Wharton professor Jack Guttentag explains, a stated-income loan today might require an interest rate that's 4 percent higher than a fully-documented mortgage application. That's a huge additional cost over the life of the loan.

Myth # 3: The typical borrower no longer qualifies for conventional financing
DBRS, a provider of credit rating opinions for financial institutions and other large-scale entities, has produced an interesting chart that compares prime mortgage underwriting standards for 2007 and 2011.

The chart plainly shows, among other things, that credit score requirements have increased while maximum loan amounts have declined.   These are good examples to illustrate changes in the lending system — and also that such changes are often irrelevant.

For instance, the basic prime loan credit score has gone from 620 to a range of 680 to 720. But so what — the typical FHA borrower has a 699 credit score and FHA loans are not prime financing.  As to maximum loan amounts, they've dropped from $2 million in 2007 to $1 million today. This just doesn't impact a lot of people. The typical buyer paid $174,800 for an existing home in July.  Not only is financing readily available, there's a very good reason to finance and refinance today: Money is incredibly cheap.   Freddie Mac reports that loan rates for both fixed and adjustable financing have slipped to levels unseen during the past 50 years.

“When you look at the realities of the marketplace it's hard to ignore the growing myths and stories which now surround the lending process,” said James J. Saccacio, chief executive officer of RealtyTrac. “How many people have been discouraged from buying or refinancing because of lending rumors and fictions?”

Are opportunities in selected markets and with selected properties being missed because of inflated application worries? Arguably that's often the case because not only are interest rates low, so too are home values. For instance, the Federal Housing Finance Agency — the government body that oversees Fannie Mae and Freddie Mac — says at the end of the second quarter that home prices were 18.8 percent lower than in April 2007.

“Not only are home prices generally stalled in most markets, prices for foreclosures and short-sales are particularly depressed,” said Saccacio. “Our foreclosure sales report for the second quarter showed that foreclosed or bank-owned homes were typically priced 32 percent lower than the average sales price of homes not in foreclosure."     Which leads us to our fourth myth.

Myth # 4: Financing is not available for foreclosure properties
Financing a foreclosure purchase at the courthouse steps is famously not available in most states. Typically the winning bidder is required to pay the full amount in cash — often on the spot in the form of cashier’s checks.

But that is not true when it comes to purchases of bank-owned properties (REO) or pre-foreclosure properties (typically short sales), which together account for the vast majority of foreclosure-related sales. REO sales alone accounted for nearly 20 percent of all sales nationwide in the second quarter. Although cash offers are common when it comes to REO sales and short sales, they can also be purchased with conventional financing — and often are.

Veteran real estate investor, author and trainer Andy Heller believes Fannie Mae and Freddie Mac may have gone a bit too far in restricting investor loans in the past few years, but that doesn’t mean financing is an insurmountable obstacle for investors.

“Many people tend to focus on obstacles when they invest, and one of the biggest obstacles they focus on today is financing. There will always be obstacles and as a seasoned investor I will take today hands down over three or four years ago,” said the 20-year investing veteran, explaining that a few years ago investors were scrapping for meager discounts of 5 to 10 percent because of intense competition from other buyers and investors, driven largely by loose lending standards.
“Without a doubt I would prefer challenging financing conditions and bigger discounts because the discount is your security blanket and your profit.”

Heller said financing options are still available for all different types of investors: newbies with little cash or credit, average investors with some cash and credit, and seasoned investors looking to expand their portfolio beyond the 10-property limit set by Fannie Mae.

“Investors today will need to be a good bit more creative than three years ago.  But it is certainly worth it if the end result is significantly greater discounts,” he said.

Saturday, December 10, 2011

Barclays analyst sees housing rebound coming in 2012

by Kerri Panchuk

Barclays Capital analyst Stephen Kim predicts a housing recovery buoyed by improving jobs numbers and the fact prices for nondistressed homes will have stabilized without government support.

"In the absence of a government homebuyer incentives, prices for non-distressed home sales have stabilized for almost a year," Kim said. "This is the most important trend in the housing industry right now, and we are amazed at how little attention it has been getting from the media and the street. This stability on the part of nondistressed prices has occurred despite a very high share of distressed activity and continued declines in overall prices."

Barclays said recent economic data — including higher job creation in November, housing starts and improved homebuyer traffic — point to some improvement potential in the sector.   In mid-2010, the federal homebuyer tax credit expired, leaving the housing market without training wheels for the first time since the 2008 economic meltdown. Yet, prices in some housing markets remained stable on the back end.

With its new outlook in the market, Barclays upgraded D.R. Horton's  stock to buy and raised price targets for D.R. Horton, Lennar, Toll Brothers and Meritage Homes.

At the same time, the investment bank raised its 2012 earnings-per-share estimates for D.R. Horton, Lennar, Meritage Homes, Pulte and Toll Brothers, while lowering its estimates for KB Home.

"Thus, the key to timing housing’s recovery depends primarily on when these first-time buyers decide it is safe to buy a house," Kim concluded.

Friday, December 9, 2011

Housing to gradually improve in 2012, NAR economist says

by KERRY CURRY

Gradual improvement in the housing market is expected next year, with existing-home sales edging up 4% to 5% and new home sales getting an even bigger boost off this year's record lows, the chief economist of the nation's largest real estate group said Friday.

"Tight mortgage credit conditions have been holding back homebuyers all year, and consumer confidence has been shaky recently," Lawrence Yun, chief economist of the National Association of Realtors, said. "Nonetheless, there is a sizeable pent-up demand based on population growth, employment levels and a doubling-up phenomenon that can’t continue indefinitely."

Yun, who made his comments during the annual NAR conference for real estate agents under way in Anaheim, Calif., projected gross domestic product growth of 1.8% for 2011, rising to 2.2% in 2012 with the unemployment rate declining to 8.7% by the second half of 2012.
Mortgage interest rates, he predicted, would gradually rise from record 2011 lows to 4.5% by the middle of 2012.

"Very favorable affordability conditions will dominate next year as well, which will probably be the second best year on record dating back to 1970. Our hope is that credit restrictions will ease and allow more homebuyers to take advantage of current opportunities."

Existing-home sales are forecast to edge up about 1% this year. Based on NAR’s current projection model, existing-home sales would total 4.96 million in 2011. NAR is revising downward existing-home sales totals in recent years although it expects little change to previously reported comparisons based on percentage change.  New-home sales for 2011 are projected at 302,000 this year, a record low, with expectations that they will rise about 23% to 372,000 in 2012.

Housing starts are forecast to rise about 8% to 630,000 from 583,000 in 2011.

With falling inventory, the median home price should rise in 2012, he said.  "Home prices have yet to show a definitive stabilization pattern in most areas. Still, given an over-correction in prices, there likely will be moderate appreciation in 2012," Yun said.

Richard Peach, senior vice president at the Federal Reserve Board of New York, said the economy continues to disappoint. "Among the significant structural impediments are the legacy of the housing boom and bust, and fiscal contrition at the state and local level."

He promoted moving foreclosures by giving incentives to military servicemembers.   "My idea is to allocate certificates to 2.5 million service members who served in Afghanistan and Iraq that could be used as a down payment on a foreclosed home in the Fannie or Freddie portfolio," he said.   This would help to absorb the inventory and stabilize the housing market.

Thursday, December 8, 2011

Goodbye Prudential Real Estate

by Terry Brown

Brookfield Residential Property Services, a Toronto-based company, announced late Tuesday it has purchased Prudential Real Estate and Relocation Services for $110 million.
 
Under a licensing agreement, Brookfield says Prudential Real Estate brokerage affiliates will be able to continue to use the Prudential brand based on terms of their franchise agreement.   However, when Brookfield acquired GMAC Real Estate in 2008, nearly all brokerages were rebranded as Real Living in 2010.   

With the acquisition of Prudential, Brookfield will now have residential franchise operations in the United States, Canada, Mexico and Portugal.

Earlier this month, Realogy - parent company of Coldwell Banker, Century 21, ERA, Sotherby's and Better Homes and Gardens - posted major losses.   Will they too go the way of Prudential and their names disappear from the Real Estate world?

TB