Mardi Boettcher's Blog

In this market, where homeowners have to compete with the “fire sale” prices of bank owned homes, it more important than ever for homeowners to be realistic about their home’s values.  It often is difficult for homeowners to objectively value their homes, which often reflects their sense of personal style.  However, by consulting with a REALTOR®, using online resources, investigating neighborhood trends, and soliciting the opinion of friends, homeowners can arrive at a reasonably accurate appraisal.  If they cannot accept the reality of the situation, I recommend that they wait for a more favorable selling climate.  On the positive side, they will often more than make up the loss from the savings on their new purchase.  It is important to have their agent help them “crunch the numbers” before making the final decision.

If they are having financial difficulties, it is critically important for them to consult with their real estate consultant to get accurate information on all their options and the possible consequences.

Approximately half of all mortgage loans are sold from one lender to another, often because the original lender is not equipped to collect payments, manage escrow accounts, pay taxes and insurance, respond to questions, and prepare payoff statements when the home is sold or refinanced.  Some borrowers may receive letters in the mail alerting them of the sale of their loan a few days after closing, while others may not receive a notice for years.

In the mortgage-industry, this is called a “transfer of servicing,” and is a common practice.  Borrowers should not be concerned about these changes, as the majority of lenders transfer their servicing rights to loans.  Generally, the selling of a mortgage loan from one lender to another is a smooth transition and does not impact the borrower.  Every so often though, there is a misstep by either the loan buyer or the loan seller.

Under the National Affordable Housing Act, when a mortgage loan is sold, the borrower is required to receive a “goodbye” letter from their current servicers at least 15 days before their next payment is due.  The letter must state the name, address, and telephone number of the new servicer; the date the old company will stop collecting payments; and the date the new company will start accepting them.  Under the Helping Families Save Their Homes Act, signed by President Obama on May 20, the new owner of the loan—which may or may not be the servicer—also must notify the borrower of the transfer within 30 days, known as the “hello” letter.

The “hello” letter should outline the same information as the “goodbye” letter sent from the former loan servicing company.  Borrowers should be cautious if they receive a “hello” letter without receiving a “goodbye” letter, as they may be the intended victim of a scam by someone who is hoping to unlawfully receive the monthly mortgage payments.  Concerned borrowers should contact their current loan servicer to verify if their loan has been transferred.  If it hasn’t, authorities should be notified immediately.

In most cases, a mortgage payment sent to the old servicer automatically will be forwarded to the new servicer for a brief amount of time, typically 60 days.  However, if payments are not sent to the correct servicer, they could become lost, and the homeowner may incur late fees.

Many of you have had questions about the new Tax Credit Laws, so I thought it would be helpful to post these links to two excellent Q & A documents for you from http://www.federalhousingtaxcredit.com/

Be sure you check with your tax professional before making any final decisions.

Enjoy!

Click here for a list of frequently asked questions.

Click here for information specifically about the eligibility requirements for existing homeowners.

For mortgages, 620 is the new magic number
Near historic low mortgage rates, favorable home prices, and the federal tax credit for first-time home buyers have contributed to home purchases in the past year.  However, the onset of the credit crisis, new regulations for home appraisals, and more stringent guidelines for purchases and refinances have resulted in confusion for some potential home buyers.

 While using a mortgage broker to find the best loan may work for some buyers, it may not always be the best route.  In the past, mortgage brokers could “shop” a loan to multiple lenders to help find the best deal.  However, new practices and procedures under the Home Valuation Code of Conduct (HVCC) have hampered mortgage brokers’ abilities, namely that lenders may no longer accept home appraisals commissioned by brokers.  As a result, consumers may have to pay for new appraisals with each lender, which costs time and money.  However, consumers who are very busy or need guidance may find that working with a mortgage broker is the easiest solution.

 Qualifying for a mortgage under current lender standards is more difficult nowadays than in years past.  Beginning Nov. 1 or Dec. 12, depending on the type of loan, Fannie Mae is tightening its lending standards to the 620 credit score benchmark—including loans backed by the Federal Housing Administration and Veterans Affairs.  Borrowers with credit scores of less than 620 will find it very difficult to qualify for a mortgage.   However, to qualify for the best rates, consumers generally need credit scores of 720 and must have verifiable, steady income.

To save yourself time and money, be sure you work with an experienced mortgage broker who knows the latest changes in regulations and underwriting practices.  A top-notch broker is able to anticipate potential problems and come up with solutions in advance so you can be confident that you will be able to finalize the sale.  This affects seller’s also.  Your agent should be sure that the buyer is working with a reliable broker.  

If you would like a referral to some excellent local brokers, just let me know.

Here is the great news we’ve all been hoping for!  Following the Senate’s favorable vote yesterday, the U.S. House of Representatives just voted 403 to 12 to extend the homebuyer tax credit, expanding the parameters to include existing homeowners and not just first-time buyers.  The California Association of Realtors (C.A.R) and the National Association of Realtors (N.A.R.) have worked for months urging Congress and the Senate to extend and expand this crucial piece of legislation.  We expect President Obama to sign the legislation in short order.

As it now stands, the federal tax credit will be extended through April 30, 2010, with a 60-day extension if a binding contract is in place prior to the deadline.  First-time homebuyers will continue to be eligible for a tax credit of up to $8,000, while existing homeowners will be eligible for a reduced credit of up to $6,500.  To qualify for the $6,500 credit, existing homeowners must have lived in their current residences for at least five years.  The bill also increases the qualifying income limits from $75,000 for single tax filers and $150,000 for joint filers to $125,000 and $225,000, respectively.  The purchase price of the home is capped at $800,000 in both instances.

Under additional provisions included in the bill, taxpayers can claim the credit on purchases completed in 2010 on their 2009 income tax returns.  The legislation maintains the provision that homebuyers do not have to repay the credit provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order.

Nationwide, more than 1.4 million first-time homebuyers were given the opportunity to become homeowners as a result of the Federal Tax Credit for First-time Home Buyers.  We expect that number to increase dramatically in the months ahead with this new legislation in place.  Thank you to my fellow members of C.A.R. and N.A.R.  We called, wrote, and e-mailed our congressional representatives and voiced our support for the homebuyer tax credit.  Our voices were heard and today’s vote is a direct result of our actions and involvement.

I have heard that U.S. Senate leaders might have moved closer to an agreement about replacing the expiring $8,000 tax credit for first-time homebuyers with a smaller one that expands access to more borrowers.  The existing credit is due to end Nov. 30.

 The proposed legislation would reduce the size of the tax credit to 10 percent of the sale’s price and cap it $7,290.  This tax credit would be available on home purchases that would go into contract by April 30th, and borrowers would have an additional 60 days to close the sale.

 The new agreement, if passed, would expand the credit to “step-up” borrowers who have lived in their current home for at least five years.  The income eligibility for first-time homebuyers would remain the same at $75,000 for individuals and $150,000 for couples.  The income criteria for step-up buyers would be $125,000 for individuals and $250,000 for couples.  The credit would be limited to homes costing $800,000 or less.

I think this is a great plan and believe it will relieve the current gridlock in the middle price range market.  Keep your fingers crossed!

Existing Home Sales came in better than expected, at 5.57M vs. the expectation of 5.35M.  The very important number….levels of inventory, shrank to a 7.8 month supply, down from a recent high of 10.1 in April.  The National Association of Realtors also reported that last month’s sales were 45% First Time Homebuyers, as they rushed in to take advantage of the $8000 tax credit. 

I still think the tax credit will be extended.  Not only will this help buyes, but the increased demand may cause prices to rise and that will encourage sellers to move forward with listing their homes.  It will be a win win for everybody.

Senate Banking Committee chairman Chris Dodd, D-Conn., went on the record Tuesday calling for a seven-month extension of the $8,000 first-time homebuyer tax credit, which is set to expire in five weeks.  Sen. Dodd said home prices are stabilizing but “we still need to use every tool at our disposal to try and fix this problem.” The White House has yet to reveal its position on the extension. The National Association of Realtors and other trade groups are supporting the extension.  Jay Brinkmann, the chief economist for the Mortgage Brokers Association told the committee that one great unknown facing the market is the affect on interest rates when the Federal Reserve stops purchasing mortgage-backed securities from Fannie Mae and Freddie Mac.  He noted that there is growing concern over the issue saying, “While the most benign estimates are for increases in the range of 20 to 30 basis points, some estimates of the potential increase in rates are several times those amounts.”

Pay close attention to this last bit.  At our office meeting last week, Dick Selzer said that he thinks interest rates will go up rapidly.

I’ll keep you posted.

Home buyers still are paying less than a home’s asking price, but had slightly less negotiating power in August than they did in July, according to the August Zillow Real Estate Market Reports. Buyers paid a median $6,525, or 3 percent, less than the last listing price on homes bought in August, down from $7,018, or 3.3 percent, less for homes bought in July, according to the report. Negotiating power peaked in January 2009, when buyers were paying 4.5 percent less than last listing price, a median of $10,096.

Sellers also continued to cut prices on unsold homes. One quarter (24.7 percent) of all homes listed for sale on Zillow had at least one listing price reduction as of Oct. 1, 2009. For the U.S. as a whole, the median U.S. price reduction was 6.6 percent off the original listing price.

Several Metropolitan Statistical Areas (MSAs) in Florida made the top 25 list of markets nationwide with the greatest gap in list price to sale price; no MSA in California made the list. In two California markets, buyers paid more than asking price during August, according to the report: In the El Centro MSA, buyers paid 2.2 percent, or a median $2,479, more than asking price; in the Stockton MSA, buyers paid 1.3 percent, or $2,515, more.

“Negotiating power is a clear reflection of inventory levels, which dropped nationally in August. Tighter supply in some markets is translating into less of a discount off listing price,” said Zillow Chief Economist Dr. Stan Humphries. “Unfortunately, the brisk spring and summer home shopping season is drawing to a close now, and with foreclosures on the rise again, inventory levels will likely head back up in the coming months, leading buyers’ negotiating power to regain the ground it lost in August.”

In our local area, inventory is low.  There are multiple offers on many properties and many are selling for more than the list price.   This means that buyers must be well qualified and pre-approved by a lender, and sellers must be realistic about pricing.  We are seeing more listings now that are not bank owned or short sales and they are selling well….if the seller has it priced competitively.

Dick Selzer says that the ecomominc indicators suggest that interest rates are bound to go up in the near future, and he thinks they will go up quickly this time.  Of course, no one knows for sure, but it is his opinion (and he’s often correct) that buyers who wait for a better time to buy, are going to regret it.

At Realty World-Selzer Realty, we don’t try to “sell” people.  We always have our clients’ best interests in mind.  That’s how we’ve build our stellar reputation….and reputation is very important to business success in a small town.

Here’s more important FHA  information:

 Although the Federal Housing Administration (FHA) has confirmed that as of Sept. 30 it will fall short of its legal requirement to maintain supplementary reserves of 2 percent of the loans it insures, FHA Commissioner David Stevens says that it will not be seeking a taxpayer bailout.

Instead, to help mitigate losses, the FHA will tighten credit standards to rebuild the cushion to 2 percent or more, without raising the premiums borrowers pay or seeking an increase in its down-payment requirement of 3.5 percent.

Under the new rules, lenders making FHA-insured loans would need to show net worth of at least $1 million, an increase from $250,000.  The agency is seeking to ensure that lenders have funds available to compensate the FHA if their loans fail to meet quality standards. 

The FHA also will impose a maximum loan value of 125 percent of the current estimated home value on refinanced loans, in line with Fannie Mae and Freddie Mac.

Appraisals will be valid for no more than four months, a decrease from the previous six to 12 months validation period.  The FHA also plans to implement appraisal changes adopted earlier this year by Fannie and Freddie.  Mortgage brokers or bank employees paid on commission won’t be allowed to order appraisers.