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Archive for the tag “Federal Housing Administration”

Conditions prime for home buying in 2012

Source: Courant HomeFinder Digest

With the housing market and mortgage industry gearing up for their peak season in home buying activity, a number of indications from both sectors could mean the most successful season in years.

Mortgage application activity on the rise

According to a recent report from the Mortgage Bankers Association, home loan activity rose 1.4 percent during the week ending May 4.  This overall increase was spurred by an upswing of purchase requests, as the refinancing share of the index declined.

Refinancing requests fell marginally to 72.1 percent from 72.6 percent a week earlier, the report found.  In addition, government initiatives such as the Home Affordable Refinance Program and Home Affordable requests from distressed borrowers as the Government Refinance Index fell 2.3 percent from the previous week.

These trends of rising purchase applications and decreasing refinance activity could be an indicator that the housing market is growing stronger.  The fact that the refinance share of mortgage application activity has trended lower during recent weeks could be a result of more current homeowners choosing to keep their home loans under the same structure as they gear up to sell their properties.

Home loan delinquencies declining

The mortgage delinquency rate of borrowers who were more than 60 days late on their home loan payments was down during the first quarter this year to a rate of just 5.78 percent.  This marks both an  annual and month-over-month decline, according to a report from TransUnion.  This is the lowest the rate has been since the beginning of 2009.  As a potential result, this could give lenders the confidence they need to extend more lines of credit to prospective borrowers in the coming months.

“To see that quarter-over-quarter, and year-over-year, more homeowners were able to make their mortgage payments is certainly welcome news, “said TransUnion U.S. housing financial services business unit Vice President Tim Martin.  “Before this, we saw two quarters of delinquency increases and while we are still about three times above the pre-recession norm, this should mark the start of consistent improvement each quarter.”

Prior to this decline, the delinquency rate had fallen for six straight quarters until climbing during the final six months of 2011.

Housing affordability reaches 40-year high

Due to recent changes in mortgage rates, median housing incomes and property values, a report from Fisery and Care-Shiller found that housing affordability is currently at the highest level seen in nearly four decades.  Home prices have fallen by as much as 35 percent since the housing market’s peak, according to the report.  Property values are now at the same level they were in 1998.

“The precipitous drop in home prices was an immediate cause of the last recession and the financial crises.  Falling home equity has cut into household consumption and has further constrained the economic recovery,” said Fisery Chief Economist David Stiff.

Nowadays, at the current median household income, the average American family that purchases a home will only need to allocate 12 percent of their annual income to the investment.  Typically, experts advise not pulling more than 30 percent of annual income toward housing, which makes 12 percent a real bargain.

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FHA Amy Ease Rules For Mortgages on Condos

Source:  Ken Harney

Home and Real Estate

www.Courant.com

Thousands of condo unit owners and buyers around the country could soon be in the line for some welcoming news on mortgage financing.  Though officials are mum on specifics, the Federal Housing Administration is readying changes to its controversial condominium rules that have rendered large numbers of units ineligible for low down-payment insured mortgages.

The revisions could remove at least some of the obstacles that have dissuaded condominium homeowner associations’ boards from seeking FHA approvals or recertification of their buildings for FHA loans during the past 18 months. Under the agency’s regulations, individual condo units in a building cannot be sold to buyers using FHA insured mortgages unless the property as a whole has been approved for financing.

According to condominium experts, realty agents, lenders and builders, FHA’s rules have become overly strict and have cut off unit buyers from their best source of low-cost mortgage money, thereby frustrating the real estate recovery that the Obama administration says it advocates.

Christopher L. Gardner, managing member of FHA ProsLLC, a national consulting firm based in Northbridge, Calif., that assists condo boards to obtain FHA approvals, said barely 25 percent of all condo projects that are potentially eligible for FHA financing are now approved.  That is despite the fact, says Gardner, that FHA financing is the No. 1 mortgage choice for half of all condo buyers and is crucial to first –time and minority purchasers.

Moe Veissi, president of the National Association of Realtors and a broker in Miami, says FHA’s strict rules “have had an enormous impact on individuals” across the country especially residents of condo projects who suddenly find they are unable to sell their units because their condo board has not sought to obtained approval from FHA as the results of objections to the agency’s strict criteria.  This, in turn, depresses the prices unit owners can obtain and ultimately, said Veissi, harms their equity holdings and financial futures.

FHA officials defend their requirements as prudent and necessary to requirements as prudent and necessary to avoid insurance fund losses, but have expressed a willingness to reconsider some of the issues that have upset condo owners and the real estate industry.  Among the biggest areas of criticism of FHA’s rules are its limitations on:

  • Non-owner occupancy.   The agency requires that no more than 50 percent of the units in a project or building be non-owner-occupied.  This rule alone has made large numbers of condominiums in hard-hit markets ineligible for FHA financing, where investors have purchased units for cash to turn into rentals.
  • Delinquent condo association fee payments.  FHA refuses to approve a project where more than 15 percent of the units are 30 days or more behind on payments of condo fees to the association.  Given the state of the economy, this has been a problem for thousands of associations, even in relatively prosperous markets.  Steve Stamets, a loan officer with Apex Home Loans in Rockville, Md., says some unit sellers and buyers have been so frustrated by the rule that they have offered to pay the amount of delinquent fees needed to bring the overall project into compliance “just to get the deal done. This is a ridiculous situation,” said Stamets, who added:  “When somebody calls up now and says they want to buy a condo with an FHA loan I cringe.”
  • Nonresidential space usage.  FHA has set a cap of 25 percent of the total floor space in a project for commercial use. Critics say this is too low and unrealistic for condo projects in urban areas, where retail and office revenues can be important to overall financial feasibility.

The agency has imposed a long list of other requirements on insurance and reserves, plus a highly controversial rule that associations interpret as creating sever legal liabilities for condo board officers if applications for FHA approvals contain inaccuracies.  Andrew Fortin, vice  president for government and public affairs at Dallas-based Associa, one of the country’s largest homeowner association management firms, say that many boards, facing the prospect of up to 30 years in prison and heavy financial penalties, have refused to apply solely because of this personal liability requirement.

FHA is expected to clarify and make other modifications in its forthcoming rules.  Whether the changes will be enough to convince condo boards to apply for approvals in large numbers is uncertain, but industry experts say they – and condo unit owners – are likely to welcome whatever loosening of the current restrictions FHA can offer.

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Pending Home Sale On The Rise!

Source:  Carol Riordan www.HartfordCourant.com – HomeLife

 

Pending home sale for February were up significantly versus a year ago according to a study just released by the national Association of Realtors (NAR).

Their Pending Home Sales Index (PHSI)* showed an overall increase across the United States to an index of 96.5, a rise of 9.2 percent compared to February of 2011.  In the Northeast, the index rose 18.4 percent to 77.7.  The Midwest also posted large gains with a 19.0 percent increase to an index of 93.8.  There was an increase of 7.8 percent in the South to an index of 105.8 and a decrease in the West of 1.8 percent to an index of 99.3.

NAR Chief Economist Lawrence Yun predicted a strong buying season based on recent monthly PHSI increases.  He said, “We had a very good January, now we have a nine-percent increase in February figures.  These are implying that this buying season will be a quite decent year.”

The unseasonably warm weather has encouraged people to go out and look for properties.  Potential buyers are not just browsing, however, but shopping seriously for homes as indicated by a rise in realtor confidence.  “Realtors are looking at some of the qualitative factors,” said Yun.  “Whether or not people are returning on their open house visits; whether people are examining homes very carefully or just kicking the tires.”

Another indication of the real estate market’s recovery is declining shadow inventory which is measured by seriously delinquent mortgages and homes in foreclosure.  Shadow inventory reached a high in the last quarter of 2009, but has been steadily declining since then.  There has also been a decline in bank-owned properties and properties owned by the government through Fannie Mae, Freddie Mac and the Federal Housing Administration.  In addition, visible inventory has reached its lowest level in the five years.  “So all three buckets of potential inventory…are declining and therefore, because it’s declining consistently, it’s implying that the market is able to absorb this inventory and it’s all moving in the right direction, “said Yun.

He noted that home sales have been essentially stable since 2009 and that the recent uptick in the PHSI is noteworthy.  “If activity is sustained near present levels, existing-home sales will see their best performance in five years,” Yun said.  “Based on all of the factors in the current market, that’s what we’re expecting with sales rising seven to 10 percent in 2012.”

*The PHSI is a forward-looking indicator based on contract signings.  The data reflects contracts, but not closings.  The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales.  Information about NAR is available at www.realtor.org.

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