Have we turned the corner?

Have we turned the corner? We'll if we haven't, we are certainly peeking around it with a giraffe-like neck. More and more, I hear everyone around the real estate industry bemoaning the fact that there is low inventory or no inventory. "If I had another listing like this one, I could sell it 20 times". There are Buyers out there and no product to offer. The tide is changing from a Buyer's market to a Seller's market by strict definition: A market which has more buyers than sellers. High prices result from this excess of demand over supply. This is certainly supported by the prices trending upward through the $500,000 level accompanied by the multiple offers have have been prominent for a number of months; in addition, unemployment figures are showing signs of improvement for numerous consecutive months. New businesses/restaurants are starting to pop up in and around the valley ... All favorable signs that we may be inching out of this hole "recession" -OR- is it springing from the hope that the election year brings? Another key factor is that the Mortgage loan delinquency rates are at their lowest since 2009. The national mortgage delinquency rate (the rate of borrowers 60 or more days past due) declined in the first three months of 2012 to 5.78 percent. This improvement ends two quarters of increases that began in the 3rd quarter of 2011, according to TransUnion (One of the big three credit-reporting agencies). Prior to the 3rd quarter of 2011, 60-day mortgage delinquency rates had dropped for six consecutive quarters. This latest quarter brings the delinquency rate to its lowest point since the first quarter of 2009. Between fourth quarter 2011 and first quarter of 2012, all but eight states experienced decreases in their mortgage delinquency rates; and TransUnion forecasts mortgage delinquency rates to drift downward in 2012 as more homeowners are able to repay their mortgage. As the season winds down, interest is still very high and should remain as such through the start of the next season. We will have an interesting interlude called the Presidential Campaign and by the time those results are in, the nationa largest lenders should likely have made a decision on their shadow industry and how they will we dealing with it. Stay tuned for more exciting news ... and as always ... Keep the faith!

Is it time to refinance yet - again?

THOSE who refinanced their mortgages a year or so ago, when interest rates averaged just below 5 percent for a 30-year fixed-rate loan, may be wondering whether it’s time to refinance yet again, now that rates are at least a full percentage point lower. As of Thursday, according to Freddie Mac’s weekly survey, the average rate on a 30-year loan was 3.84 percent, down from 3.88 percent the previous week and 4.71 percent around the same time a year ago. The rate on the 15-year loan averaged 3.07 percent, off from 3.12 percent the previous week and 3.89 percent last year. A Freddie Mac spokesman says the rates are the lowest in the 41-year history of the weekly survey. Many homeowners opted to refinance last fall and winter when mortgage rates first dipped below 4 percent, said Guy Cecala, the chief executive of Inside Mortgage Finance, a trade publication. “People who jumped at 5 percent also jumped on 4 percent,” he said. Mr. Cecala says many borrowers refinancing these days are at least second-timers — he, for one, did so last fall in order to cut his mortgage interest three-quarters of a percentage point — but he said he knew of no specific data tracking this trend. If you’re considering refinancing, financial planners suggest you first delve into your financial goals — specifically, how long you expect to live in your home. Some homeowners decide it makes more sense to stay with their current mortgage, especially if the savings are small or they plan to move within a year or two. “There is a hassle to refinancing — all this paperwork,” said Sheila Walker Hartwell, a financial planner in Manhattan. One of her clients, she noted, recently decided against refinancing because she was already building equity in her home, which she hoped to use on her next home purchase. “When you refinance, you’re not building equity,” Ms. Walker Hartwell said. “You’re starting at the beginning” of the amortization tables. Amortization schedules work like this: In the first few years, almost all of the payment goes toward interest, so the longer you have the loan, the more is put toward the principal. “That’s very important,” said Edward Ades, a partner in Universal Mortgage in Brooklyn. He noted, for example, that in the first year of a $300,000 30-year mortgage at 4 percent, a borrower would have paid off 1.76 percent of the balance; in the fifth year, that rises to 2.06 percent. Those who refinanced in the last year or two don’t have to consider amortization tables, but they do need to know their equity position — and when the refinancing would begin to pay off. To calculate that, start with a rundown of all the closing costs, then divide the closing costs by the amount you expect to save on each monthly payment. So if closing costs total $5,000, and your monthly savings are $400, it will take you 12.5 months to break even on refinancing. If it takes you, say, three years to recoup the costs and you hope to move within two years, then refinancing does not make sense, said John J. Vento, a Staten Island financial planner. Depending on your lender, you probably need to have 20 percent equity, and maybe a little more, if you want to wrap your closing costs into the new mortgage. Those who are underwater — shorthand for owing more than the home is worth — may consider the Home Affordable Refinance Program, or HARP, which is now widely available, Mr. Cecala noted. Greg McBride, a senior financial analyst for Bankrate.com, suggests homeowners start with their current lender, and ask if they can streamline the process. You may be able to avoid a second appraisal and title insurance reports and fees, he said, adding, “That would save not only time but also money.” He also suggests that borrowers check out new lenders and consider a shorter loan term, to “shave years off the payments” and build equity faster. As always - Keep the faith!

Are we turning the corner? Fannie Mae thinks so ...

A new Fannie Mae study suggests Americans are beginning to consider 2012 a good year to acquire a home.

The GSE released its March National Housing Survey of just over 1,000 Americans and found more citizens expect rents and home prices to increase in the coming months, making today a better time to purchase a residence.

About 73% of those interviewed said buying a home today is a good idea, up from 70% in February.

Thirty-seven percent of those interviewed believe prices will increase, which is up 5 percentage points since February and the highest point reached in more than a year.

About half of the respondents expect both home rentals and purchases will grow over the next 12 months.

Consumers also are more confident about their own finances, with 44% believing their financial situations will get better in the near future.

"Conditions are coming together to encourage people to want to buy homes," said Doug Duncan, vice president and chief economist of Fannie Mae. "Americans' rental price expectations for the next year continue to rise, reaching their record high level for our survey this month. With an increasing share of consumers expecting higher mortgage rates and home prices over the next 12 months, some may feel that renting is becoming more costly and that homeownership is a more compelling housing choice."

Still, 58% of those surveyed believe the economy is still on the wrong track, with only 35% holding a more optimistic view of the nation's economic situation. Twelve percent believe their financial situation will worsen, and 21% believe their income is now significantly higher than it was 12 months ago.


Keep the faith!

How much of your property taxes do you write-off?

The Franchise Tax Board will soon be getting a new computer system and starting with the 2012 tax year, property owners will be required to break down payments into deductible and non-deductible portions when they file.

This change could result in a significant reduction in deductions. Up until this point, property owners claimed the total amount of their property tax bill or as provided on the 1098 form by their mortgage company.


With the tax filing season majorly over, this is a perfect opportunity to interface with your CPA to discuss how this will affect your future filings; and the need for any changes to amounts withheld for the year.

FHA to deny mortgage backing for credit disputes above $1,000

As of April 1, potential borrowers with ongoing credit disputes totaling more than $1,000 are no longer eligible for mortgages insured by the FHA.

Under the rule, borrowers must either pay off the outstanding balance on these collections accounts or document a payment arrangement that the lender must then submit to the FHA before closing. The payment arrangement will be counted into the debt-to-income ratio for the new home loan.

The rule excludes disputed accounts from more than two years ago, along with those related to theft. But the lender must document an identity theft or police report on the fraudulent charges.

An FHA spokesman said the rule was designed as another protection for the FHA emergency fund. The fund levels slipped to 0.2 percent of at-risk insurance last year, well below the 2 percent mandated by Congress. The FHA raised insurance premiums on April 1 as well to boost the fund by $1 billion.

See your Mortgage Professional to answer all your questions about the FHA program and all other options available to you.

FHA Mortgages are poised to get more expensive

If you're considering buying a house with an FHA mortgage and expect the seller to help out with your closing costs, here's a heads-up: The Federal Housing Administration plans to impose significant restrictions on the amount of money that sellers can contribute at closing in the near future.

On top of that, the FHA also will be raising its mortgage insurance premiums during the coming weeks, increasing charges for new purchasers across the board.

You might ask, why hit us with additional financial burdens right now, just as housing is showing modest signs of recovery in many areas and the spring buying season is getting underway?

One big reason: Over the last six years, the FHA has been the turnaround champ of residential real estate, offering down payments as low as 3.5% despite the recession and housing bust and growing its market share to 25%-plus from 3%. The program is financing 40% or more of all new-home purchases in some metropolitan areas and is a crucial resource for first-time buyers and moderate-income families, especially minorities. With a maximum loan amount of $729,750 in high-cost areas, it is also a force in some of the country's most expensive markets — California, Washington, D.C., New York and parts of New England.

But during the same span of rapid growth, the FHA's insurance fund capital reserves have steadily deteriorated — far below congressionally mandated levels. Delinquencies have been increasing. According to the latest quarterly survey by the Mortgage Bankers Assn., FHA delinquencies rose to 12.4%, compared with a 4.1% average for prime (Fannie Mae-Freddie Mac) conventional fixed-rate mortgages and 6.6% for VA loans.

As a result, the FHA is under the gun — with Congress and within the Obama administration — to get its own house in order, cut insurance claims and rebuild its reserves. The upcoming squeezes on seller contributions and bumps in premiums are steps in this direction.

The seller-contribution cutbacks could be painful, particularly in areas of the country where closing costs and home prices are relatively high.

Here's what's involved: Traditionally the FHA has been uniquely generous in allowing home sellers — including builders marketing new construction — to sweeten the pot for purchasers by chipping in money to defray closing costs. The FHA now allows sellers to pay up to 6% of the price of the house toward their buyers' closing expenses. Fannie Mae and Freddie Mac, by comparison, cap contributions at 3%. The VA's ceiling is 4%.

Under newly proposed rules, the FHA cap would drop to the greater of 3% of the home price or $6,000. In sales involving houses priced at $100,000 or less, this wouldn't change anything ($6,000 equals 6% of $100,000). But on all sales above this threshold, the squeeze would get progressively tighter.

On a $200,000 home, a buyer could today ask the seller to pay for $12,000 of a long list of settlement charges including all prepaid loan expenses, discount points on the loan, interest rate buy-downs and upfront FHA insurance premiums, among others. Under the proposed cutback, the maximum amount would be slashed in half.

On many home transactions, the reductions would force sellers to lower their prices to enable cash-short buyers to get through the closing. In other cases, sales might simply be too far of a stretch for some purchasers.

The proposed cuts are open to public comment through the end of this month but are highly likely to be adopted in much the same form soon afterward. The FHA also is restricting the types of "closing costs" that sellers can pay. Six months' or a year's worth of interest payments or homeowner association dues in advance no longer will be permitted — a serious blow to many builders who use these as financial carrots.

Beyond these changes, FHA also plans significant increases in insurance premiums — upfront premiums will rise to 1.75% from 1%, effective April 1, and annual premiums will increase by 0.1% on all loans under $625,000 and 0.35% on mortgage amounts above that, effective June 1.

William McCue, president of McCue Mortgage Co. in New Britain, Conn., which does a sizable percentage of its business with the FHA, said the cumulative effect of all these increases "will not just crowd first-time buyers out of the FHA market, it will prevent them from owning a home that, absent these new costs, would be affordable."

Bottom line: Nail down your FHA money and seller-contribution negotiations as soon as you can because later looks a lot more expensive.

Real Estate Financing ~ Points -vs- No points

The New York Times recently ran an article that covered some basics and provided some stats. Definitions are good if you are not experienced but stats are only fluff because everyone's situation is different so what John Smith does has no bearing on what you should do.

Here's the highlights of the New York Times article but read on to the end as I will make some valid points that you should consider closely before you automatically agree to what your Lender has chosen for you or what information you give to Lenders to quote you on, especially important if you are shopping your loan with 2 or 3 Lenders. so here goes the Times story highlights ...

Points lose favor
With interest rates at or near record lows, many borrowers are seeing little reason to pay points when buying or refinancing a home. Some are even opting for what’s known as “negative points,” agreeing to a slightly higher rate to help pay closing costs.

Making sense of the story

Paying points enables a borrower to “buy down” the interest rate on a mortgage in exchange for an upfront fee. The trend away from points partly reflects borrower sentiment that rates are already low enough, according to industry experts.

A point equals 1 percent of the loan amount, so paying one point on a $250,000 refinancing costs an extra $2,500 at closing, in addition to other mortgage fees, taxes, and escrow amounts. Paying a point usually reduces the interest rate by 0.25 points over its term, so for instance, instead of 4 percent, the rate is 3.75 percent.

The average number of points paid in 2011, according to a Freddie Mac survey, was 0.7 percentage points, less than half the levels people paid in the 1990s. The average has been 0.7 percent for three years, after it hit a low of 0.4 percent in 2007; in 1995 it averaged 1.8 percent, according to Freddie Mac data.

The primary advantages of paying points are a lower rate and monthly payment. To decide if paying points is worthwhile, borrowers should consider two key decisions: How long they plan to live in the home, and how much they can afford in close costs.

Many mortgage professionals suggest following this rule: If the borrower plans to live in the home for at least five years, paying points will help the homeowner to reap savings.

Some borrowers are even going for negative points, which is also called a lender rebate or points in reverse. In exchange for accepting a higher interest rate, the lender agrees to give the borrower a credit, which is usually used for closing costs.

Roger's highlights:

1) If you purchase and pay points, you can write off those points on your taxes. If you refinance and pay points, you can still write them off but you must amortize them over the terms of the loan;

2) When you pay points, you have availed yourself of a lower interest rate so that you realize a savings monthly which helps your cashflow. It generally takes 3-5 years of savings to equal the points you paid up front (depending on the loan amount, rate and term) however from that point until you pay the loan off, refinance or sell the property, you are saving $ _X_ amount monthly after the break even date.

3) If cash is a little tight when you are purchasing or refinancing, you could seek a no point loan or even a no cost loan. ..coupling this with closing credits from the seller could put you into your dreamhouse.

Talk to a Realtor® - your local desert real estate soltions expert is:
Roger A. Sullivan reachable at 760-610-3245 or Roger@RogerASullivan.com

as always - Keep the faith!