'Mortgage News' Category
FHA Tightens Loan Requirements
January 23rd, 2010 Categories: Mortgage News, Real Estate News
Latest Market Recap
We knew changes in FHA-insured loans were coming. Now it appears they are almost here. Last week, the FHA said it would tighten loan requirements on loans it insures. Specifically, it would raise the MIP to 2.25% – effective this spring – and then seek permission to increase the percentage again. 
The FHA also proposed requiring borrowers with credit scores below 580 to put up a 10% down payment. Those with higher credit scores would still qualify for a 3.5% down payment. In addition, the FHA proposed reducing seller concessions to 3% from 6% of the mortgage. Both proposals will require a public comment period before taking effect.
We have been warning for the past month that anyone considering an FHA-insured loan should act now. We stand behind that warning. Fact is, any changes instituted by the FHA will only increase the cost of an FHA-insured loan.
Borrowers might be feeling a little dour over the prospect of paying more for an FHA-insured loan, but they are likely not feeling as dour as homebuilders are. The homebuilders’ sentiment index declined again in January to 15, which means that only one in six builders thinks the market is “good.”
We could argue, persuasively, that homebuilders have done everything possible to set the stage for a recovery: they have culled inventories and cut new construction to a virtual standstill. For all of 2009, homebuilders started only 554,000 homes – the lowest since 1945. Back then, there were only 132.5 million Americans. Today, there are 307 million.
Higher prices would certainly help lift homebuilder spirits. On that front, things are improving. Radar Logic’s monthly Residential Property Index (RPX) showed year-over-year price increases in eight of the 25 markets surveyed, the most since July 2007, when the RPX price composite peaked. Radar Logic said that increased affordability is helping to boost prices, as well as sales. On the latter, November home-sales volume increased year-over-year and month-over-month in all of the 25 metropolitan markets the RPX covers.
Low mortgage rates were no doubt a contributing factor to the sales rally. They remain low today. In fact, rates dropped (by a few basis points) across the board for the third-consecutive week. Do not expect much more, though; we have been saying that any improvements in mortgage rates will be incremental at best, and that has been the case.
The Farther They Fall, The Higher They Could Rise
Richard Carson and Samuel Dastrup, two university professors, recently published an interesting academic paper (a synopsis is posted at Econbrowser.com). Carson and Dastrup examined how the magnitude of housing-price declines correlated with various factors, such as overbuilding, extent of sub-prime lending, and median income. Not surprisingly, these factors were related to price declines. However, the most important factor was the magnitude of the previous price run-up, which accounted for more than half of the observed variance in the size of the price decline.
The takeaway from Carson and Dastrup’s research is that the farther prices ran up in a hot market, the farther they tend to run down in the subsequent cooling. Not surprisingly, the hottest markets – Las Vegas , Riverside , Miami and Sacramento – have fallen the farthest and cooled the fastest. Many of these markets are now as cold as an Arctic winter, particularly Las Vegas , where home prices have dropped 50% and more.
However, cold markets often provide the best buying opportunity. Consider Las Vegas : a home that cost $200,000 in 2007 and lost 50% of its value costs $100,000 today. A 50% gain pushes its value up to $150,000. In other words, prices do not have to appreciate back to their peaks for people to book considerable equity or an investment gain. This simple math is worth repeating to homebuyers and residential real estate investors, especially to those residing in or near frigid markets.
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January Mortgage Market Update
January 9th, 2010 Categories: Mortgage News
MARKET RECAP
Is it better to get it right or get it fast? Most of us would prefer the former, though there are some who appear to prefer the latter. To wit, “Bad News for Housing: Prices Flattening” was the headline for a recent CNNMoney.com report, which went on to state that the S&P/Case Shiller Home Price index was “unchanged in October.”
Problem is, that’s not what happened: The S&P/Case Shiller index actually posted a fifth-consecutive gain in October, edging up 0.4%. Admittedly, the index is showing signs of weakening: When the index started improving in July, 14 of 20 markets posted price increases. In August and September, 18 of 20 markets posted price increases. In October, the number dropped to 8 of 20. 
It’s worth considering that October might have been the high point for unemployment. In November, the unemployment rate dropped, so we wouldn’t be surprised to see some improvement in November’s home-price figures. But we appear to be in the minority. Most forecasts predict price declines in 2010. Fiserv Lending Solutions, a financial analytics firm, forecasts that prices will fall in all but 39 of the 381 markets it covers, posting an average drop of 11.3%. Meanwhile, Moody’s forecast calls for another 8% drop.
We are familiar with the reasons for why home prices will fall: an expected pick up in foreclosures, which will be exacerbated by strategic defaults, or people deliberately walking away from their mortgage obligations as the value of their homes dips below the amount they owe.
The pessimistic punditry could be over-discounting two important factors: First, if employment is turning around, more people will be working, which means fewer people will be inclined to simply walk away from their homes – regardless if they are upside down or not. Second, the number of pre-foreclosure filings in many of the heaviest hit areas is dropping. According to Default Research, Los Angeles County , Clark County ( Las Vegas ), and Miami – Dade County all experienced considerably fewer filings in November compared to October. We can’t say it’s the start of a trend, but we can say what it is – an obvious improvement.
We feel more secure in saying we see a trend forming in mortgage rates. For the past five weeks, rates have been trending higher. It’s a trend we see continuing in 2010. Expectations are for the yields on mortgage bonds and the 10-year Treasury note to be 75 basis points higher a year from now, which would likely put the 30-year fixed-rate mortgage near 6%.
.
|
Economic
Indicator |
Release
Date and Time |
Consensus
Estimate |
Analysis
|
|
Construction Spending |
Mon, Jan. 4, |
0.4% |
Moderately Important. Commercial spending is contracting to absorb an inventory glut. |
|
Pending Home Sales |
Tues, Jan. 5, |
111.5 Index |
Important. Buyers continue to take advantage of affordable prices and low mortgage rates. |
|
Factory Orders |
Tues, Jan. 5, |
0.5%
(Increase) |
Important. Recent increases in orders suggest an increase in economic activity. |
|
Mortgage Applications |
Wed, Jan. 6, |
None |
Important. Rising rates should motivate more fence sitters to refinance or buy. |
|
Federal Reserve FOMC Minutes
|
Wed, Jan. 6, |
None
|
Important. The Fed is expected to show greater bias toward sustainable economic growth. |
|
Employment Situation |
Fri, Jan. 8, |
Unemployment Rate: 10.1% |
Very Important. The consensus expects a leveling of the unemployment rate, but an improvement could send mortgage rates higher. |
|
Consumer Credit |
Fri, Jan. 8, 3:00 pm, et |
$4 Billion (Decrease)
|
Moderately Important. Consumers are becoming less averse to using credit. |
Stating that there is a positive correlation between employment and housing prices seems like an exercise in stating the obvious, and it is. But it’s worth delving into. CalculatedRisk.com posted an enlightening graph on that relationship on its Web site (http://www.calculatedriskblog.com/2009/12/are-homes-now-cheap.html). Not surprisingly, when employment improves, loan performance and housing prices follow.
CalculatedRisk’s data suggest that housing prices tend to lag improvements in the unemployment rate. But since its housing-price data only date back 23 years, no meaningful conclusion can be drawn. This year, housing prices have actually been improving ahead of the unemployment rate. Tax credits and record low mortgage rates are the immediate explanation, but they are not the complete explanation. There are too many impacting variables – known and unknown – to fully explain the phenomenon.
Of course, we think employment is the most important variable, and the data support that notion, which is why if we see a two-percentage point or better improvement in the unemployment rate, most of the dire housing predictions are unlikely to be realized. We’ll get a better sense of what to expect on that front with Friday’s employment situation.
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VA Zero-Down Loan Limits Reduced For 2010 In San Diego County
December 23rd, 2009 Categories: Foreclosures & Short Sales, Mortgage News, VA Loans
The Department of Veteran’s Affairs (VA) announced that the maximum zero-down VA loan limit for 2010 is being reduced from $593,750 to $437,500 for San Diego County. Remember that VA loan amounts exceeding $417,000 are considered VA Jumbo loans.
Other areas, such as Los Angeles and Orange Counties, will have maximum zero-down loan limits as high as $593,750 whereas much of the San Francisco Bay Area can go up to $962,500.
A veteran can purchase a home in Pitkin County Colorado up to $1,094,625 with zero down payment. Click here for a complete list of areas with limits greater than $417,000.
Qualifying veterans can still purchase higher priced homes in San Diego County with significantly lower down payments than with Conventional financing.
Assuming the veteran has full entitlement, he/she may purchase a $450,000 home with as little as $3,125 down which is less than 0.7%. A $550,000 home can be purchased with as little as $15,625 down which is only 3.125%. Click here for examples for additional prices.
Please remember that the entire down payment can be a gift.
Whether you are a VA, FHA, or Conventional buyer, please email me: Kevin@MyCWMtg.com with any questions.
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How Do You Tell If A Condo Complex Is VA Approved?
October 25th, 2009 Categories: 4S Ranch, Brookside Escondido, Escondido, Mortgage News, Poway, Rancho Bernardo, Rancho Penasquitos
When you are preparing to list your property, having an agent who knows the available financing types for that property, especially condominiums, is extremely important. When you interview agents, make sure they know this information or you may have a more difficult time marketing and ultimately selling your property. 
Here is the link to the section of the VA website that allows you as a homeowner to search for VA approved condo projects:
On the left hand side, click on “Condo/PUD Reports”. You will then have six fields to complete:
- Select report type of Summary or Detail (either is fine)
- Select the type of records to receive (Condo)
- Enter the Condo/PUD name – you are encouraged to use an asterisk (*) as this will pull all approved projects in the specified city, or for example type M* and it will pull all approved projects beginning with the letter M
- Enter the Regional Office (leave this one alone)
- Enter the City and State – unlike the FHA search site, this site does not locate by zip code
- Retrieve only approved Condos – keep marked as yes
Regarding PUD’s – although VA does not require that a PUD be prior approved, the lender is responsible for ensuring both title and lien-related VA regulatory requirements are met for each VA loan such as:
- The estate must not be less than fee simple
- Title must not be subject to unreasonable restrictions of use and occupancy
- VA loan is secured by a first (1st) lien on the property
- Any mandatory homeowner association assessment is subordinate to the VA-guaranteed mortgage
Pretty standard stuff, and one you would expect your Realtor to know but you might be surprised. We have the resources for you and know all the projects. If you have any questions about using this look-up tool or any VA or other loan related items, please feel free to call us at (877) 571-2289 or email us at suejohson@windermere.com.
We also have an expert on our team from CW Mortgage, Kevin Kueneke who supplies us with this type of information and expertise. You may also contact Kevin direct at 760-500-1919 or email him at Kevin@MyCWMtg.com.
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