FHA Buyers.. Put the Pedal to the Metal!

Hear ye, Hear ye!  All Buyers intending to utilize an FHA Loan for purchasing a home, it is best to get an FHA case number assigned as quick as possible.  All FHA case numbers assigned on or after 6/3/2013 the FHA will collect annual Mortgage Insurance Premiums(MIP) for the life of the loan. What does this mean?

Currently, FHA borrowers would MIP until they could prove they had at least 20% equity in their property.  Once they had an appraisal showing the 20% equity, the borrower could petition the lender to remove this additional monthly charge.  Now, the borrower will be paying the MIP for the life of the loan, which in most cases, is 30 years. 

In addition, MIP factors are changing so not only will FHA borrowers be paying MIP for a longer time, but also they will be paying higher amounts.  So, if you are on the fence about purchasing and were planning on using an FHA loan because of its low 3.5% down payment, you better hurry and get under contract soon.

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Why it Takes So Long For a Buyer to Get A Loan....

The lending industry has tightened its lending practices since the days when loans were given out like candy.

In 2005, loan underwriters who approve loans were paid on volume and would often underwrite 6-8 loans a day. With today's tighter compliance policies, underwriters can only underwrite 2-3 loans per day. In the past, a junior underwriter could sign off on minor conditions, such as verifying employment, etc. Now all conditions must go back to the main underwriter to be checked for compliance. This creates a large log jam of files for the underwriter and thus, causes delays in processing loans.

The final version of the 805 page "rule book" for qualifying mortgages was released by the government last Thursday. Now, if a bank goes outside the guidelines in processing a loan, the bank could forfeit their legal right to foreclose on the house. This means if a bank "bends the rules" in creating a loan, it is possible that a borrower could live in a house forever without ever having to make another mortgage payment. Consequently, lenders are being expecially careful in creating new home loans.

The Fiscal Cliff is casting a Shadow (Inventory)...

In real estate. shadow inventory refers to the inventory of homes not yet for sale that will eventually come on the market sometime in the near future. Although most people believe shadow inventory to be the group of distressed homes in some phase of foreclosure, shadow inventory actually includes three categories of homes: 1. Properties already foreclosed on, but not yet on the market for sale 2. Houses currently in the foreclosure process 3. Properties where the homeowners are at least 90 days delinquent on their mortgage payment Because of the number of lenders and the numerous homeowners, the exact total of homes in the shadow inventory is an ever changing number. Studies indicate that 95 percent of those homeowners who fall 90 days behind on their mortgage obligation never catch up and their home eventually comes on the market as a short sale or foreclosure. Those who catch up on their mortgage payments are referred to as the “cure rate.” From 2000-2006, the cure rate was 45 percent, while from 2007 to the present, the cure rate is less than 5 percent. As shadow inventory comes on the market, the total supply (inventory) of homes increases. The increase of shadow inventory homes, however, does not result in an increase in more equity home listings, but an increase in distressed property listings (REOs, short sales, foreclosures) that typically will force the price of existing home listings downward. However, recently, the lenders have been pricing their short sales and foreclosures at market value and are attempting to drive pricing up. We are not certain at this time if lenders are holding back on releasing their foreclosed properties on to the market because they are waiting to hear the results of the new government budget plans. We do know that several important real estate issues are certain to be addressed in the new year. One issue is the tax credit for mortgage interest and the other is the tax on the deficiencies in short sales and foreclosures. Both issues will affect the number of homes sold in 2013 and the future. To see a list of houses that have foreclosed and are currently for sale, visit my website at www.MaryDrefs.com and search on Homes for Sale.

The November 2012 Real Estate Market results are in. While total sales in the Phoenix Area market declined slightly, the number of homes for sale increased 2.3% and now over 18,000 homes are for sale in the Arizona Regional MLS. The median price of those homes sold rose 3.3% over October's prices. The number of homes facing foreclosure fell again in November. Now 11,973 properties are pending foreclosure compared with the peak of 50,568 homes pending foreclosure in November 2009. The number of Lender Owned Homes and Short sales selling rose to make up 36.1% of all total sales in November.. In September of 2010 Lender owned homes and short sales made were 74.1% of the total sales. In November '12 876 lender owned homes sold and 1,583 short sales closed escrow. So the ratio of short sales to lender owned properties selling is approx. 2 to 1. Economists are predicting that the housing construction industry in Arizona will rise in 2013. They are expecting to increase the construction workforce by 13,100 workers. Overall, economists are predicting that at our current pace, it will take Arizona 2-3 years to consider our state economically recovered. Good news for all as we move into the new year. If we can help you or your friends with any real estate need, just give us a call. We are here and ready to help!

Which Lender is refinancing the most mortgages for distressed AZ homeowners?

JP Morgan Chase is leading the way in refinancing the most Arizona mortgages for distressed residential AZ homeowners since the beginning of the year. However, Chase's rate reduction averaged only 1.85% off the mortgage interest rate while the other banks averaged a 2.05% rate reduction. Arizona Mortgage Refinances Chase 57% Wells Fargo 30% Citibank 11% Bank of America 1.5% Ally Bank 1% Bank of America's performance in refinancing for distressed AZ homeowners is pitiful. HOwever, Bank of America is leading the way in creating efficient short sale procedures for distressed homeowners. The face of short sales is soon to change as the Mortgage Debt Relief Act of 2007 fades away on December 31, 2012. This act allowed many homeowners who conducted a short sale before 12/31/2012 to not have to pay taxes on their deficiencies. With no follow up governmental policies at this time, AZ homeowners may not feel the benefit of a short sale outweighs the benefit of a foreclosure. With the short sale, homeowners do need to prove a hardship so they do need to submit numerous documents to their lender and then moves out toward the end of the transaction. With a foreclosure, the homeowner just quietly moves out of the house with no additional effort needed. And with AZ being an anti-deficiency state, homeowners know their deficiency in a foreclosure is usually forgiven, but their taxes on a deficiency are not. Currently the number of foreclosures in AZ has declined. This is largely due to the number of homeowners choosing to do short sales versus a foreclosure. I do think we will see a turnaround in these numbers in the first quarter of 2013 unless congress steps in and creates more benefits for short sale sellers.

Housing will never return to pre-crisis levels because baby boomers are aging and the next generation lacks the population numbers to support the credit and homeownership expansion that occurred in the decades leading up to the credit meltdown. The U.S. economy since the 1980s managed to subsidize spending in other areas by leaning on housing. Home equity loans were a major problem in the meltdown of the housing industry. The population growth after the boom basically drove consumption, and we had this remarkable increase in demand for housing. Now that the boomers are heading into retirement, future populations are smaller and it is unlikely housing will ever get back to the peak levels experienced before the 2008 financial crisis. We are not going to have the degree of credit availability that we had back in 2005. Despite housing still facing a great deal of uncertainty, Brian Montgomery, chairman of the Collingwood Group, told the same crowd that the nation can “expect mild to moderate improvement in the housing market.” Home prices are already ticking up, especially in AZ, he noted. But Montgomery conceded that rules drafted to fix housing, including the qualified mortgage rule, are still going to have a dramatic impact on the market. "Unwinding legislation is extremely difficult,” he said. “It’s almost impossible to unwind the CFPB (Consumer Financial Protection Bureau), but it doesn’t mean you can’t try to soften what they are trying to do. We need to make it easier for buyers to obtain loans before we will see a big improvement in the market.”

Another Real Estate Meltdown Not Likely..........

Housing will never return to pre-crisis levels because baby boomers are aging and the next generation lacks the population numbers to support the credit and homeownership expansion that occurred in the decades leading up to the credit meltdown. The U.S. economy since the 1980s managed to subsidize spending in other areas by leaning on housing. Home equity loans were a major problem in the meltdown of the housing industry. The population growth after the boom basically drove consumption, and we had this remarkable increase in demand for housing. Now that the boomers are heading into retirement, future populations are smaller and it is unlikely housing will ever get back to the peak levels experienced before the 2008 financial crisis. Credit availability is the second factor, We are not going to have the degree of credit availability that we had back in 2005. The nation can expect mild to moderate improvement in the housing market. Home prices are already ticking up, especially in AZ. But Montgomery conceded that rules drafted to fix housing, including the qualified mortgage rule, are still going to have a dramatic impact on the market. We need to make it easier for buyers to obtain loans before we will see a big improvement in the market.