Real Estate News

     

 

Market showing signs of recovery

Metropolitan Regional Information Systems, Inc. (MRIS), a leading provider of real estate information technology and the largest multiple listing service in the nation, announced that the Mid-Atlantic Housing Market showed signs of moderate recovery in the first quarter of 2010.

FHA LOAN REQUIREMENTS WILL BE TIGHTENED

If you are seriously considering buying a home using FHA financing, it may be wise to do it fairly soon. The Federal Housing Administration is going to tighten up the requirements for home buyers. Among the upcoming changes are:

FHA Announces Policy Changes to Address Risk and Strengthen Finances
 

New Measures Will Help FHA Better Manage Risk, While Maintaining Support for the Housing Market and Access for Underserved Communities
 

WASHINGTON – Federal Housing Administration (FHA) Commissioner David Stevens today announced a set of policy changes to strengthen the FHA’s capital reserves, while enabling the agency to continue to fulfill its mission to provide access to homeownership for underserved communities. The changes announced today are the latest in a series of changes Stevens has enacted in order to better position the FHA to manage its risk while continuing to support the nation’s housing market recovery.

The FHA will propose to take the following steps: increase the mortgage insurance premium (MIP); update the combination of FICO scores and down payments for new borrowers; reduce seller concessions to three percent, from six percent; and implement a series of significant measures aimed at increasing lender enforcement. U.S. Housing and Urban Development Secretary Shaun Donovan previewed the changes in December of last year, noting that the FHA would announce additional details before the end of January.

“Striking the right balance between managing the FHA’s risk, continuing to provide access to underserved communities, and supporting the nation’s economic recovery is critically important,” said Commissioner Stevens. “When combined with the risk management measures announced in September of last year, these changes are among the most significant steps to address risk in the agency’s history. Additionally, by continuing to provide affordable, responsible mortgage products, FHA will support the housing market’s recovery. Importantly, FHA will remain the largest source of home purchase financing for underserved communities.”
Announced FHA Policy Changes:
  1. Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending
    • The first step will be to raise the up-front MIP by 50 bps to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge.
    • If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP.
    • This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing
    • The initial up-front increase is included in a Mortgagee Letter to be released tomorrow, January 21st, and will go into effect in the spring.

       
  2. Update the combination of FICO scores and down payments for new borrowers.
    • New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA's 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.
    • This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well.
    • This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.

       
  3. Reduce allowable seller concessions from 6% to 3%
    • The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.
    • This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.

       
  4. Increase enforcement on FHA lenders
    • Publicly report lender performance rankings to complement currently available Neighborhood Watch data - Will be available on the HUD website on February 1.
      • This is an operational change to make information more user-friendly and hold lenders more accountable; it does not require new regulatory action as Neighborhood Watch data is currently publicly available.
    • Enhance monitoring of lender performance and compliance with FHA guidelines and standards.
      • Implement Credit Watch termination through lender underwriting ID in addition to originating ID.
      • This change is included in a Mortgagee Letter to be released tomorrow, January 21st, and is effective immediately.
    • Implement statutory authority through regulation of section 256 of the National Housing Act to enforce indemnification provisions for lenders using delegated insuring process
      • Specifications of this change will be posted in March, and after a notice and comment period, would go into effect in early summer.
    • HUD is pursuing legislative authority to increase enforcement on FHA lenders. Specific authority includes:
      • Amendment of section 256 of the National Housing Act to apply indemnification provisions to all Direct Endorsement lenders. This would require all approved mortgagees to assume liability for all of the loans that they originate and underwrite
      • Legislative authority permitting HUD maximum flexibility to establish separate "areas" for purposes of review and termination under the Credit Watch initiative. This would provide authority to withdraw originating and underwriting approval for a lender nationwide on the basis of the performance of its regional branches
In addition to the changes proposed today, the FHA is continuing to review its overall response to housing market conditions, and continuing to evaluate its mortgage insurance underwriting standards and its measures to help distressed and underwater borrowers through FHA/HAMP and other FHA initiatives going forward.

 

Delinquent Mortgages Reach Record Levels

November 20, 2009


Almost 10 percent of all mortgages on one- to four-unit properties are in some stage of foreclosure, up from 2.65 percent a year ago on a seasonally adjusted basis, according to the Mortgage Bankers Association’s National Delinquency Survey released Thursday.

The combined percentage of loans in foreclosure or at least one payment past due was 14.41 percent on a non-seasonally adjusted basis, the highest ever recorded in an MBA delinquency survey.

The bankers blamed the high foreclosure levels on unemployment. “Over the last year, we have seen the ranks of the unemployed increase by about 5.5 million people, increasing the number of seriously delinquent loans by almost 2 million loans and increasing the rate of new foreclosures from 1.07 percent to 1.42 percent,” says Jay Brinkmann, MBA’s chief economist.

Brinkmann points out that prime fixed-rate loans represent the largest share of foreclosures and are the biggest driver of the increase in foreclosures.

Home builders and housing analysts mostly shrugged at the high foreclosure-rate information.

“My prediction is we’ll probably recover on a seasonal basis,” Robert Toll, chairman and CEO of Toll Brothers, the largest builder of luxury houses, said yesterday at a conference in New York sponsored by Citigroup Inc. “It’s generally accepted that the homebuilding industry is off the mat and on the road to recovery.”

Josh Levin, a housing analyst at Citigroup Global Markets Inc. in New York, said he expects sales to continue to be slow until January or early February, followed by a surge as buyers try to beat the April 30 expiration of the tax credit.

“The bouncing along the bottom is distorted by government policies,” he said in an interview with Bloomberg News yesterday.

Source: Mortgage Bankers Association (11/19/2009) and Bloomberg, Kathleen M. Howley and John Gittelsohn (11/20/2009)

Insurance quick hits:

  • C.L.U.E. reports display 5 years of claim history on the house being purchased AND on the buyer at any location.
  • Most insurance companies consider claims and credit history in their underwriting and pricing.
  • A home insurance policy does not protect against flood damage.
  • Most home insurance policies have strict limitations for how much your jewelry, artwork, furs, and others are protected, unless you ADD specific amounts for each.

 

 

MD mortgage program thriving

Nearly 4,000 turned to the state last year for $767 million in low-interest home loans

By Jamie Smith Hopkins | Sun reporter

Here's a mortgage program that's not in trouble.

Nearly 4,000 homebuyers turned to the state for their home loans last fiscal year, a record for Maryland's 28-year-old loan program at a time of increasing disarray in the mortgage industry.

The state made about $767 million in low-interest loans to buyers, almost all of them purchasing their first home, in the 12 months that ended June 30. That's three-and-a-half times the amount it lent the previous fiscal year - and far above the $269 million record set in the 1995 fiscal year.

Stephen D. Silver, the state Department of Housing and Community Development's chief financial officer, credits timing for the big jump in demand.

The state expanded its "More House 4 Less" offerings a few years ago from a single product to several - 30-, 35- and 40-year mortgages including interest-only loans - but word filtered out slowly.

Meanwhile, first-time homebuyers found their private mortgage options shrinking this year as foreclosures rose and lenders, stung, backed away from borrowers with shaky credit or little money to put down.

"I'm sure we are picking up some people that were being steered toward subprime," said Silver, referring to loans aimed at borrowers with credit problems.

Thus far, the state has fewer delinquent loans than do lenders with mortgages in Maryland insured by the Federal Housing Administration, the state housing and community development agency said.

The state's loans have below-average interest rates - about 6 percent last fiscal year while the market rate was closer to 6.5 percent. Borrowers are also eligible for assistance with down payment and closing costs.

The products are all fixed rate. "We wanted to make sure our borrowers were getting something with no surprises," Silver said.

The state made 3,882 loans last fiscal year, triple the number a year earlier. Though that's a fraction of all new loans, it's a hefty increase at a time of slumping home sales.

Home values, which remain high, are part of the reason homebuyers would flock to a program that offers down payment and closing-cost help. Many first-time buyers are hard pressed to put even 5 percent down. With average sales prices in Maryland at $380,000, a 5 percent down payment would equal $19,000.

Ryan W. James, senior mortgage banker with First Horizon Home Loans in Timonium, said the More House 4 Less loans - sometimes called "CDA" because they're handled by the state's Community Development Administration - have grown in popularity as the state made it easier and quicker to get one.

"CDA had a bad reputation for a long time," said James, who said he now does 10 to 15 of the loans a month and said the processing time is much faster than it once was. "What took weeks with CDA now takes days. ... That helped a lot."

The average More House 4 Less borrower got a loan equaling 99 percent of the value of the home. Nine out of 10 participants got down payment assistance, closing-cost help or both from the state.

Borrowers had to be buying either for the first time or in targeted areas, such as Baltimore City. The average borrower had a household income of about $55,000 and purchased a home priced at almost $200,000.

The state housing agency, which finances its loans with mortgage revenue bonds, said it hasn't run into trouble getting money as investors abandon other parts of the mortgage market. Silver figures that's because the bonds are rated AA and are mostly tax-exempt, and because all the mortgages the state approves have either private or government insurance.

jamie.smith.hopkins@baltsun.com

 

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