Mardi Boettcher's Blog

If you are planning to use an FHA loan, here is some important information you need to know.A property must be FHA eligible.  That means it cannot have any “health and safety issues.”  Your real estate agent should be able to advise you as to which properties will not qualify.  This will save you a lot of time and disappointment.  If your agent is not sure, s/he should consult with your lender.  FHA does not require a pest report or section 1 clearance unless the appraiser makes negative comments about the property that would cause the lender to want to know more information.  So, if your agent knows, going into the loan process, that there is going to be a potential issue, then s/he needs to make sure that it’s possible to get a section 1 clearance or to get the repairs done prior to the appraisal process.

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.

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.

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.

If you are sitting on the fence about purchasing, you may want to reconsider. The lenders are very nervous about getting burned again…and they are being watched very closely. Here is the latest from Rick Costa, President of American Mortgage Partners:

Republican congressmen are becoming more concerned about the Federal Housing Administration’s financial plight and they want to increase FHA’s downpayment requirement to 5%. Rep. Ed Royce, R-Calif., said FHA is operating at the same dangerous leverage ratios that led to the takeover of Fannie Mae and Freddie Mac. Rep. Scott Garrett, R-N.J., said he has drafted a bill that would increase the FHA downpayment requirement to 5% from the current 3.5% level. “There are increasing reports of the likely necessity of a taxpayer bailout for the FHA and this legislation aims to implement reforms to try to prevent such a bailout from occurring,” Rep. Garrett said at a House Financial Services Committee hearing. The Garrett bill also calls for a General Accountability Office study to determine the appropriate leverage ratio for FHA. In the early 1990s, Congress mandated that FHA maintain a minimum 2% capital ratio. A recent audit shows that the federal mortgage insurance fund has fallen below the 2% minimum. But FHA officials say the insurance fund should be able to maintain a positive capital position and FHA will not need taxpayer assistance.

At the time, my clients sign their documents, I explain that their loan may very well be sold.  In fact, that is why we are having such challenges with underwriters right now.  In order to sell the loan, they have to be sure that all the “t”s are crossed and the “i”s dotted.  In most cases this is a common practice and not a problem, but occasionally there are issues.  Here is an excellent article from The California Association of Realtors (CAR) which explains all the details:

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.

I recently had a conversation with a client who wants to wait a couple of years to purchase because she thinks prices will continue to go down with more bank owned homes coming on the market.  I told her that, in this area, the inventory of bank owned properties has really slowed down.  One colleague of mine described it as “drying up.”  Perhaps that is just a temporary situation.  Time will tell.  In the meantime, the lowest priced homes are getting multiple offers with the winners offering as much as $20,000 or more over the asking price.  The consensus among the local Realtors is that we have passed the bottom and are headed back up. 

Below, is an article from C.A.R. with the latest data for the state, but bear in mind that we are a unique local market here.  The areas that had massive growth are the areas that seem to be hurting the worst.  Our lack of housing keeps our prices elevated.  That’s why there were ten offers (6 of them first-time buyers) on a house I tried to get for some clients last weekend.  (They didn’t want it badly enough to bid as high as I recommended and they didn’t win.)    Here is the article…..

Foreclosure filings decrease less than 1 percent in August
Foreclosure filings, including notices of default, scheduled auctions, and bank repossessions were reported on 358,471 U.S. properties in August, a decrease of less than 1 percent from July, and an increase of nearly 18 percent from August 2008.  The report by RealtyTrac^® also shows one in every 357 U.S. housing units received a foreclosure filing in August.

“The August report demonstrates that there still is an ample supply of properties filling the foreclosure pipeline even while the outflow of bank-owned REO properties onto the resale market is being more carefully regulated,” said James J. Saccacio, chief executive officer of RealtyTrac. “After hitting a high for the year in July, REOs dropped 13 percent in August, but we also saw a record high number of properties either entering default or being scheduled for a public foreclosure auction for the first time.”

California documented the nation’s third highest state foreclosure rate, with one in every 144 housing units receiving a foreclosure filing.  California REOs declined 32 percent from the previous month, but continued to post the highest overall total of any state, with 92,326 properties receiving a foreclosure filing in August. California’s total was down 15 percent from the previous month and was also down 9 percent from August 2009—he first year-over-year decrease in California foreclosure activity in RealtyTrac’s monthly reports.

Six California metro areas documented foreclosure rates among the top 10 in August. Stockton posted the nation’s second highest metro foreclosure rate—one in every 74 housing units received a foreclosure filing—followed by Merced at Number 3 (one in 78), Riverside-San Bernardino-Ontario at No. 4 (one in 80), Vallejo-Fairfield at No. 5 (one in 82), Modesto at No. 6 (one in 84), and Bakersfield at No. 10 (one in 94).

Despite home buyers being advised to issue down payments of at least 20 percent, many home buyers are finding that smaller down payments result in better interest rates—but also higher payments.

 Rules put in place in late 2008 by Fannie Mae and similar rules adopted by Freddie Mac are less favorable to borrowers who put down 20 percent to 25 percent–partially because the GSEs consider these borrowers to be more of a credit risk since they are not required to purchase private mortgage insurance.

I don’t know that there is any evidence to support that position.  It has always been my understanding that statistics showed that buyers making larger down payments were less likely to default.  It appears to me that the lenders are just in fear now and trying to get insurance for their protection.  

According to Fannie Mae, borrowers benefit from this industry practice because they are able to leave themselves a financial cushion by not issuing larger down payments, and can instead save the extra money for emergencies.

 It is important to note though, that smaller down payments mean higher monthly payments because the loan itself will be larger.  

Again, I think this policy is an over-reaction on the part of the lenders.

In any case,  this is what we need to deal with, so be sure you work with a knowledgeable loan consultant who can help you make the best decision for your individual situation.  As always, I am happy to refer you to local brokers I know and trust.

 To read the full story from the New York Times, please click here

With housing prices down, mortgage rates at a 30-year low and foreclosures soaring, you have plenty of incentives to jump into the real estate market.  

“Time is of the essence”  right now because the $8,000 tax credit stimulus expires at midnight, Nov 30, 2009.  In order to be sure you make the deadline, you need to be in escrow by October 1, 2009.  So get your pre-approval letter and select your home ASAP.

While foreclosures can offer you big discounts, many bank-owned properties require substantial repairs.  You will need to know what you are getting into and I can guide you safely through the search and buying process.

For a free list of foreclosed properties go to www.bankownedweekly.com/mendocino