CAR Market Matters Advisory, Nov 20

Nov. 20, 2008

 C.A.R. Resource Guide

REALTORS(R) throughout the state have a long-standing tradition of community involvement and making a difference in the neighborhoods they serve. The recent wildfires throughout Southern California have devastated many families and caused a great deal of property damage in many Southern California communities. C.A.R. has compiled information in the REALTORS(R) Care section of car.org. There, REALTORS(R) and consumers will find a list of resources, including what to do and who to contact after a fire or other natural disaster, as well as insurance-related information.

 For a complete list of fire-related resources, please visit: http://takeaction.realtoractioncenter.com/ct/OpS3IDd1kSU1/

 C.A.R. Mortgage Update

 The CALIFORNIA ASSOCIATION OF REALTORS(R) (C.A.R.) has created consumer information sheets detailing the various mortgage modification programs available through the larger lenders and government entities, and also has created an easy-to-use reference chart about available programs.

 . The consumer sheets contain information such as eligibility requirements; who to contact to apply; costs associated with the program; and other vital data. In general, the loan modification programs on the chart and consumer information sheets are intended for primary residences only.

. Mortgage loan modifications typically are handled on a case-by-case basis. Homeowners having difficulty meeting their mortgage obligation or interested in finding out more about a loan modification program should start by contacting their lender. Prior to calling a lender or loan servicer, homeowners should have the following information available: loan number; income information and documentation; most recent mortgage statement; bank statements; and a letter demonstrating financial hardship.

To download the mortgage modification sheets, please visit: http://takeaction.realtoractioncenter.com/ct/W1S3IDd1kSUq/

 

 Wall Street Journal

What if you don't qualify?

The majority of the mortgage modification programs from the larger lenders only are available to homeowners who either already are in default or are at risk of defaulting on their primary residences. However, some homeowners, in particular those who may default on a vacation home or an investment property, have some options available.

MAKING SENSE OF THE STORY FOR CONSUMERS

 . Homeowners who are in default or at-risk of defaulting should contact a reputable credit counseling agency to discuss possible options other than foreclosure. When calling a credit counseling agency, the homeowner should have their loan number, most recent mortgage statement, bank statements and a letter demonstrating financial hardship. To find a credit counselor, visit the U.S. Dept. of Housing and Urban Development's (HUD) Web site at http://takeaction.realtoractioncenter.com/ct/I1S3IDd1kSUL/ or the non-profit organization National Foundation for Credit Counseling at http://takeaction.realtoractioncenter.com/ct/IpS3IDd1kSUM/.

. Homeowners should contact their loan servicer as soon as possible to try to work out potential solutions. According to the Federal Housing Finance Agency (FHFA), some borrowers who do not meet the requirements for an existing mortgage modification program may still be considered for a loan adjustment based on personal circumstances.

. If a mortgage modification is not possible, homeowners may want to consider a short sale-- sell the home for less than the amount of the mortgage. Although a short sale enables a homeowner to avoid foreclosure and often causes less damage to the homeowner's credit score than a foreclosure, the lender must agree to accept the loss and in some cases the homeowner may have to pay taxes on the difference. Also, many lenders are overwhelmed by the large number of short sales being submitted by homeowners, so it could take longer than usual to receive a short-sale acceptance from the lender.

. If a homeowner cannot qualify for a mortgage modification or a short sale, some lenders will consider a deed in lieu of foreclosure, where the homeowner transfers the title to the lender in exchange for debt forgiveness. Properties that have additional debt, such as home equity lines of credit or additional mortgages, may not qualify for a deed in lieu of foreclosure. Homeowners who have additional debt tied to the property must share this information with their lender for consideration when applying for a short sale.

To read the full story, please click here: http://takeaction.realtoractioncenter.com/ct/6dS3IDd1kSEJ/

 Wall Street Journal

 HUD Issues New Consumer Protection Rules on Mortgages

The U.S. Dept. of Housing and Urban Development (HUD) has announced updates to the Real Estate Settlement Procedures Act (RESPA), including the requirement of a three-page good-faith estimate that provides borrowers with rates, fees, prepayment penalties, and possible increases in monthly payments for every mortgage transaction.

MAKING SENSE OF THE STORY FOR CONSUMERS

. The Real Estate Settlement Procedures Act (RESPA) is a 1974 law that sets standards for home-purchase transactions. The purpose of RESPA is to provide consumers with information about the real estate mortgage transaction and the costs associated with it and to prohibit certain practices, such as referral fees between settlement service providers, that often result in higher costs and reduced quality to consumers

. A key change to RESPA is the creation of a standardized good-faith estimate (GFE) -- an itemized list of fees and costs associated with a mortgage loan. Currently, there are several good-faith closing estimate forms available, which can make it difficult for borrowers to compare rates and offers. Beginning in 2010, the U.S. Dept. of Housing and Urban Development (HUD) will require all lenders and mortgage brokers to use the standardized form. HUD officials estimate that the change will save home buyers as much as $700 at closing, due in part to a requirement limiting the increase between the good-faith closing cost estimate and actual fees to 10 percent. The new three-page good faith estimate also will outline rates, fees, any prepayment penalties, and the possibility of later increases in monthly payments.

. HUD also has created a new page on the HUD-1 Settlement Statement to help homebuyers better understand what they are being charged at closing and how these charges compare to the GFE issued by their lender. The new GFE is designed to help mitigate future foreclosures by ensuring home buyers thoroughly understand their loan terms. Many housing analysts believe the current number of foreclosures is due to many borrowers making "uninformed decisions" during the homebuying process. The new, standardized GFE and revised HUD-1 will not be required until Jan. 1, 2010.

To read the full story, please click here:

http://takeaction.realtoractioncenter.com/ct/67S3IDd1kSED/

In Other News

 Press Enterprise

 Fewer Inland default filings from September to October

To read the full story, please click here:

http://takeaction.realtoractioncenter.com/ct/7dS3IDd1kSU2/

 

Washington Post

Beyond White Walls and Empty Rooms

To read the full story, please click here:

http://takeaction.realtoractioncenter.com/ct/u1S3IDd1kSUx/

 

Bloomberg

Credit Score More Important Than Ever for Best U.S. Loan Rates

To read the full story, please click here:

http://takeaction.realtoractioncenter.com/ct/OdS3IDd1kSEV/

 

 San Francisco Chronicle

Bay Area homeowners owe more than home's worth

To read the full story, please click here:

http://takeaction.realtoractioncenter.com/ct/7pS3IDd1kSUs/

 

 Los Angeles Times

Credit card holders squeezed as issuers cut credit limits

To read the full story, please click here:

http://takeaction.realtoractioncenter.com/ct/I7S3IDd1kSUA/

 CNBC

Median home prices fall around US in Q3

To read the full story, please click here:

http://takeaction.realtoractioncenter.com/ct/WpS3IDd1kSUS/

Talking Points

Here's what to tell consumers

 . When searching for a home inspector, consumers should seek recommendations and referrals from their REALTOR(R), as well as other recent home buyers. It is recommended that consumers interview at least three potential candidates during this process. Home inspectors are not regulated as closely as other industries; so home buyers should consider choosing one that belongs to the American Society of Home Inspectors. The American Society of Home Inspectors requires its members to complete at least 250 inspections. Consumers also should inquire about fees, and whether the inspector is bonded and insured.

 . As credit underwriting guidelines tighten and down payment requirements increase, some home buyers, especially first-time home buyers, are finding it more difficult to qualify for a mortgage loan offered by a traditional financial institution. One viable option for some first-time home buyers, or those with challenged credit, is to apply for a home loan with the Federal Housing Administration (FHA). These loans are mortgages issued by a private lender but insured by the FHA. They often require smaller down payments and offer fixed-rate or adjustable-rate loans. However, not all home buyers will qualify. The FHA requires verification of income and assets along with a full home appraisal. While consumers with credit scores a low as 580 may qualify, home buyers should contact an FHA lender for an accurate assessment of their situation and ability to qualify.

C.A.R Market Matters, November 6

Thursday November 06, 2008

Brought to you by the CALIFORNIA ASSOCIATION OF REALTORS

C.A.R's Mortgage Update

This week C.A.R is introducing an occasional new feature in Market Matters entitled Mortgage Update. Mortgage Update will update REALTORS and consumers on recent news about the mortgage market. 

This issue of Mortgage Update contains news and updates on the "Hope for Homeowners" program, and foreclosure assistance programs for borrowers with mortgages issued through Indymac, JP Morgan Chase and Co, and Countrywide.

MAKING SENSE OF THE STORY FOR CONSUMERS

Early projections indicate that only 20,000 troubled homeowners will apply for the "Hope for Homeowners" program, a considerable reduction from the previously estimated 400,000 homeowners who were expected to apply. The $300 billion program was launched Oct. 1 and is designed to help troubled homeowners rewrite a "risky" mortgage loan into a 30-yr, fixed-rate loan with a lower interest rate. During the first two weeks of the program, the Federal Housing Administration, which oversees Hope for Homeowners, reported receiving only 42 applications. Some housing experts believe the low application rate is due to the program being voluntary for lenders and provisions requiring homeowners to agree to an equity share with the government. 

Full Story

Less than half of homeowners with mortgage loans through IndyMac have responded to offers from the Federal Deposit Insurance Corporation (FDIC) to lower loan payments and interest rates. The FDIC, which is running IndyMac, mailed 35,000 letters offering homeowners an opportunity to rework the terms of their mortgages. The goal is to reduce the monthly payment on a loan, including taxes and insurance, to no more than 38% of the borrower's pretax income. The FDIC is prepared to implement the following: reduce the interest rate to as low as 3%; extend a loan's terms to 40 years; and waive interest on a portion of the mortgage balance.

Full Story

JPMorgan Chase % Co has reported that it is instituting a 90-day foreclosure freeze while it searches for ways to make payments easier for consumers. The program may enable up to 400,000 borrowers to reduce their interest rates or principal amounts. The bank will also open 24 mortgage counseling centers in areas with the highest delinquency rates. JPMorgan also is planning to hire 300 loan counselors to work with delinquent borrowers and employ approximately 150 additional staffers to review each mortgage prior to sending it through the foreclosure process. The program offer is extended to borrowers who have loans through Washington Mutual Inc., and clients of EMC, a mortgage unit of Bear Sterns Companies. Both companies were acquired by JPMorgan in recent buyouts and takeovers.

Full Story

Bank of America, which acquired Countrywide in July, said that nearly 400,000 troubled homeowners who have subprime mortgages and option adjustable-rate loans through Countrywide may be eligible for loan modifications. To be eligible for the Bank of America plan, homeowners must occupy the home as their primary residence, the mortgage must be seriously delinquent---or likely to become so; and the loan must have been serviced by Countrywide and originated prior to December 31, 2007. Bank of America will help borrowers by restructuring first-year payments of principal, interest, taxes and insurance to no more than 34% of the borrower's income; halting foreclosure sales against borrowers who are likely to qualify for a loan modification; and waiving restructuring fees and prepayment penalties. 

Full Story

 Chicago Tribune

Finding an area with appreciation potential

Some real estate experts believe that home buyers who purchase a house during the current market will gain equity if they stay in the house for at least five years and purchase in a desirable neighborhood.

MAKING SENSE OF THE STORY FOR CONSUMERS

Neighborhoods with strong employment bases, such as hospitals, universities, and government, tend to be recession-proof. People desire to live near their jobs, so housing that is in close proximity to these types of industries are generally higher in demand than those in other areas.

High gas prices and roadway congestion have led many people to see "walkable" communities--nieghborhoods that offer both daily needs such as grocery stores and coffee shops to more speciality items like hair salons, all within walking distance. Walkable communities also provide public transportation, which is becoming more desirable to many home buyers and is increasing demand for housing in these areas.  One web site, walkscore.com, calculates teh walkability of a community by locating stores, restaurants, schools, parks, and other attractions that are within walking distance. The scores are based on a 100-point scale with 100 points being a walker's paradise.

Home buyers who seek a new or nearly-new home should search in areas where the homebuilder is known for honoring warranties and building high-quality homes that are structurally sound. Homes in these areas are more likely to weather well and gain value in the future than homes in areas where the home builder is unknown.

Homes in neighborhoods with sales momentum generally appreciate at a faster pace than areas where sales are flat. Some real estate industry consultants advise clients to pay close attention to the "list to sale" numbers, which reflect the difference between the asking price and the final closing price. Usually if the gap in list-to-sale numbers is narrow, then the real estate market in that area is improving.

Full Story

CNN MONEY

7.5 million homeowners "underwater" 

Approximately 7.5 million U.S homeowners owe more on their mortgages than their homes are currently worth, and an additional 2.1 million Americans own homes valued at only 5% more than their loan.

MAKING SENSE OF THE STORY FOR CONSUMERS

According to some estimates as many as 12 million borrowers may have negative equity in their home, meaning that they owe more on their mortgage loans than their homes are currently worth. However, according to statistics gathered by C.A.R over the last 40 years, homeowners who purchase a house and keep it for at least five years have an average annual rate of return at nearly 12%. 

Although California's inventory of homes with high negative equity is higher compared with other states, lower home prices have increased affordability, making it easier for first-time home buyers to enter the market and other buyers to move up to larger houses or more desirable neighborhoods.

Borrowers who are facing foreclosure should work with their lender and apply for a loan modification program. Many financial institution are offering homeowners the opportunity to rewrite an adjustable-rate mortgage into one that is fixed for 30 years. Some banks are also offering existing customers zero interest for a short period of time and lowering the principle balance on the loan to make payments more affordable.

Full Story

Washington Post

Meltdown 101: How we'll know we're in a recession

Recent economic reports and many news stories have led some Americans to believe the country is in a recession. Although unemployment is high and incomes have failed to keep pace with inflation, the country is not yet in a recession, which must be declared by the National Bureau of Economic Research (NBER)

MAKING SENSE OF THE STORY FOR CONSUMERS

The National Bureau of Economic Research (NBER) is the entity that officially declares the country is in a recession. Founded in 1920, NBER consists of more than 1,000 university professors and researchers who study the economy. The Business Cycle Dating Committee within the NBER makes the call on recessions. Often times NBER doesn't declare a recession until after it's over.

Contrary to popular belief, a recession is not defined as two consecutive quarters of negative gross domestic product growth. NBER defines a recession as a significant decline in an economic activity spread across the economy, lasting more than a few months. This is usually based on reports such as the gross domestic product--a measure of the value of all goods and services produced within the United States; real income, employment, industrial protection, and wholesale and retail trade.

A recession's start and end dates are based on the high and low points within the nation's "business cycle" --periods of economic growth and contraction. A recession begins when the economy peaks at the top of an expansion period. It continues as the economy contracts until it hits the "trough", the lowest point on the downward cycle. After that, the economy begins to recover. The "peak" date is the beginning of the recession and the "trough" date is its end. The last official recession began in March 2001 and lasted eight months before ending in November 2001.

Full Story

LA Times

'Green' improvements can add to a home's appeal

Many home buyers are seeking "green" homes to offset their carbon footprints and pocketbooks. Although most green homes are new houses, owners of existing homes for sale can make "green adjustments" to be more competitive in the market.

MAKING SENSE OF THE STORY FOR CONSUMERS

C.A.R recently launched a new Green website--"At Home with Green", which provides information to consumers and REALTORS about how to find and sell green homes; how to make green home improvements; and other tactics for greening their homes, offices, and lives. To visit, "At Home with Green" CLICK HERE

Consumers can work with their local utility company to conduct an energy audit to determine how green a home is and to get pointers on how to further green the home. Although the changes could be costly and the homeowner likely will not recoup all the money spent making the green upgrades, the home could sell faster with the improvements. Some home buyers may make an offer on the home as is, but might request a credit towards making the green improvements. Often times the credit will be nearly twice the amount that it would have cost had the homeowner made the improvements prior to listing the home.

Homeowners can make green improvements in their homes by making simple changes, such as replacing regular light bulbs with compact fluorescent bulbs (CFLS) which use only one-fifth the energy of regular bulbs and last almost 12 times longer, or more substantial improvements like replacing appliances with ENERGY STAR-rated ones, which can use as little as one-quarter the energy of older models.

Full Story

In Other News...

CNBC

What Does 'Good' Credit Really Mean?

Wall Street Journal

The Stampede of White Elephants

Mercury News

Freddie Mac says fewer homeowners are borrowing from equity

Washington Post

A crackdown on credit fixes

LA Times

Banks, consumer advocates urge U.S to allow credit card debt forgiveness

Talking Points

Here's what to tell consumers

The U.S Dept. of Housing and Urban Development (HUD) offers an online guide to preventing foreclosure. The guide provides consumers with information such as how to contact a housing counselor; when and how to talk to their lender, how to find foreclosure resources, tips on avoiding foreclosure and foreclosure scams, as well as information for consumers who cannot keep their home. The guide to preventing foreclosure can be accessed here. 

C.A.R Update on Economic Situation

Tuesday, Oct 28, 2008

Brought to you by the California Association of Realtors

Oct. 28, 2008

Dear C.A.R Member:

Much has happened since passage of the Emergency Economic Stabilization Act earlier this month. 

N.A.R has urged U.S Treasury Secretary Paulson to take advantage of the extensive experience of local commercial and residential real state professionals in the management and disposition of real property as the U.S Treasury Dept. implements the Troubled Asset Relief Program (TARP) as part of the Emergency Economic Stabilization Act.

Congress has held a number of hearings over the past few weeks looking into multiple factors that contributed to the current financial situation. Last week, Congress heard testimony from Securities and Exchange Commission Chairman Christopher Cox, Federal Reserve Board Greenspan, former U.S Treasury Secretary John Snow, and other leading players. The hearings are laying the groundwork to inform legislation expected to address regulatory reform of the finance and lending industries as well as safeguards to prevent a recurrence of the current financial crisis. It is our expectation that the legislation will be introduced early next year. 

Additional hearings are covering the implementation of a second stimulus package. As the U.S economy continues to struggle, politicians on both sides of the aisle are feeling pressure from their constituents, creating a strong incentive for Congress to pass meaningful legislation as the national elections near and the country heads into the holiday season. The Senate, House of Representatives, and the White House have stated their willingness to work through a lame-duck session to pass a second economic stimulus package prior to the end of the year.

While many ideas have been circulated, few, if any, appear certain to be included in a second stimulus package, according to C.A.R policy analysts.  Some of the ideas under discussion include: An additional round of stimulus checks; extending the temporary loan limit of $729,750 for Government Sponsored Enterprises (GSE) and Federal Housing Administration (FHA); infrastructure spending; financial aid for states; a temporary increase in block grants; and an extension of unemployment and welfare benefits. 

One important factor determining what, if anything, will be done during a lame-duck session is the outcome of the upcoming presidential election. Should the Democrats take the White House and secure a filibuster-proof majority in the Senate, they may choose to wait till after Jan. 20 before proposing or enacting legislation. Should the Republican nominee take the White House, Democrats may feel the Bush administration will be more willing to compromise in order to pass last-minute initiatives prior to leaving office. C.A.R and NAR will continue to strongly advocate for making permanent the $729,750 loan limit as part of any investigation that is forthcoming.

The Hope for Homeowners (H4H) initiative that was part of the July stimulus package began to be implemented Oct 1. The H4H program allows troubled homeowners to keep their home, while enabling lenders to receive a Federal Housing Administration (FHA) guarantee on the loans. Under terms of the voluntary program, lenders agree to refinance the existing mortgage at 90% of the current appraised value and assume the loss on the remaining balance; the new loan is an FHA guaranteed 30-yr, fixed-rate, fully amortized, fully documented loan; and the homeowner must forego a portion of the home's future appreciation to the FHA when it is sold. 

The FHA has posted a list of lenders participating in the HOPE for Homeowners program. When contacting the lenders, the FHA is strongly encouraging consumers to also contact their servicing lender and any subordinate lien holders as their participation is vital in order to refinance into a H4H mortgage. The program is voluntary and servicing lenders may offer different solutions for avoiding foreclosure. The FHA plans to update the list weekly on Fridays. The list is available HERE. 

C.A.R will continue to report additional news, useful information and analysis to you as the evolving situation warrants.

Sincerely,

William E. Brown

2008 President 

CALIFORNIA ASSOCIATION OF REALTORS

C.A.R Market Matters, October 16

Thursday, October 16, 2008

Brought to you by the CALIFORNIA ASSOCIATION OF REALTORS

Wall Street Journal

Mortgage Lending for Sellers

Due to stricter loan underwriting standards and increased difficulty for some borrowers to qualify for a loan, even for those who are well-qualified, more sellers are offering financing to potential home buyers, which some believe can be mutually beneficial to both buyers and sellers, and can give sellers a competitive edge.

MAKING SENSE OF THE STORY FOR CONSUMERS

In addition to sellers receiving a steady flow of income by providing financing to home buyers, sellers also can profit from the interest payments. Sellers also may be able to sell the mortgage on the secondary market, thus reducing their risk. However, seller-financing is not always the best option. Sellers who need the equity from their current home to purchase their next one are advised to not offer seller financing. 

Buyers, especially those who are self employed, work on commission, or have lower credit scores, but can explain the circumstances that led to it, also may benefit from seller financing. often times, these buyers do not qualify for traditional, conforming loans, reducing their ability to become homeowners. 

To reduce the risk of possible loan default, most real estate professionals recommend that sellers request a down payment of at least 10%, especially if the buyer does not have an ideal credit score. Buyers who do not have a large financial stake in the home may be more likely to default than those with a more substantial down payment. It is also recommended that sellers work with a real estate attorney to draft a contract that includes possible implications if the buyer issues a late payment, defaults on the loan or neglects to adequately insure the property. Sellers also should work with an experienced loan servicer who can collect payments and keep records.

FULL STORY

Los Angeles Times

California REALTORS forecast lower home prices, rising sales in 2009

The California Association of Realtors on WEdnesday presented its "2009 Housing Market Forecast," at California Realtor Expo 2008 in Long Beach, Calif. The annual forecast drew a crowd of more than 1,200 real estate industry professionals who learned what consumers and the real estate industry can expect for California's housing market next year. 

MAKING SENSE OF THE STORY FOR CONSUMERS

Sales of existing family homes are expected to increase in 2009 by 12.5 percent, to 445,000 units. In August, sales were 85% above the monthly for the current cycle and for the first time this year were ahead of 2007 in year-to-date terms.

Although the median home price is expected to decline by 6% in 2009, to $358,000, the lower home price likely will increase the state's affordability rate, currently at 48%, enabling more first-time home buyers to enter the market. C.A.R anticipates home prices will stabilize once inventory thins out. In August, the Unsold Inventory Index stood at 6.7 months, down from 16.9 months in January 2008, meaning that it would take approximately 6.7 months to deplete the market at the current sales rate. 

The ability of consumers to obtain financing continues to play a vital role in stabilizing home prices. Currently, buyers with at least 10% available for a down payment, proof of income and excellent credit scores may qualify for conforming loans--mortgage loans that are $729,750 or less.

FULL STORY

Wall Street Journal

No quick fix for Housing Prices

The recently enacted government rescue plan, which includes the U.S government taking stakes in major financial institutions and temporarily guaranteeing new bank debt, is expected to stabilize the economy. However, some economists believe that additional measures are needed to help stimulate the demand for housing and reduce mortgage delinquencies and foreclosures. 

MAKING SENSE OF THE STORY FOR CONSUMERS

In July, the government approved a permanent loan limit increase--from $417,00 to $625,000--on mortgages backed by the Federal Housing Administration (FHA), which some analysts believe is helping more homeowners obtain mortgages, especially in high-cost areas like California.  In September, 28% of home purchases were financed with FHA mortgages, an increase from 19% in August. This year, more than twice as many home buyers sought government-backed mortgages than did those who did so last year.

Although the government program, Hope for Homeowners, aims to assist homeowners by helping them refinance their current mortgage loans into more affordable ones in exchange for the homeowners sharing price appreciation with the government, some experts believe that the program will not assist enough homeowners. Hope for Homeowners will help 400,000 homeowners who are in default or foreclosure; however, some estimates show that there are nearly 12 million Americans who owe more on their mortgages than their homes are currently worth. Homeowners at risk of defaulting on their mortgage should contact their mortgage company as soon as possible to explore options including loan modification.

Some economists believe that mortgage rates, although still at historic lows, need to decline to 5.25 percent in order to attract more home buyers and deplete the current supply of homes on the market.

FULL STORY

In Other News...

San Francisco Chronicle

Mortgage last loan people pay, study finds

Sacramento Bee

Local builders find few looking to buy new homes

CNN 

Credit tight, but key lending rate eases

Los Angeles Times

Errors in loan documents can save strapped homeowners

Wall Street Journal

California officials try to avoid second housing hit

C.A.R Market Matters, October 09, 2008

Thursday, October 09, 2008

Brought to you by the CALIFORNIA ASSOCIATION OF REALTORS

New York Times

Central Banks Coordinate Global Cut in Interest Rates

Hoping to thaw the current credit freeze, the Federal Reserve, the European Central Bank, the Bank of England, and the central banks of Canada and Sweden reduced their primary lending rates by a half percentage point on Wednesday. The Chinese central bank also reduced its key interest rate and lowered bank reserve requirements, while the Bank of Japan's rates remained unchanged.

MAKING SENSE OF THE STORY FOR CONSUMERS

The purpose of the rate cut is to increase consumer confidence, which in turn should help stimulate the economy. When consumers and businesses have more confidence in the economy, they usually spend more money, which bolsters the economy by enabling retailers to increase sales and prevent future layoffs.

The Federal Reserve controls the interest rate that banks charge each other for short-term loans. Usually this leads to banks lowering the rates they charge consumers and businesses. The short-term loan-rate reduction, from 2 percent to 1.5 percent, should have an almost immediate effect on credit card rates, according to financial analysts. Interest rates on automobile and business loans also should decline. Generally, the short-term loan-rate reduction also leads to reduction in mortgage rates; however, it is too soon to predict if that will happen in this case given the way the market has reacted to recent economic news.

Some credit card companies already have reduced their credit card rates. Although there may be room for further reductions for some consumers, many experts believe that only consumers with the best credit scores and payment history will benefit from the rate reduction.  Most credit card companies deem consumers with high credit scores as providing the least amount of risk.

Consumers with fixed-rate mortgages will not benefit from the rate cut; however, those with adjustable-rate mortgages (ARMs) may. When banks receive an interest rate cut, they may pass along the savings to consumers. Homeowners with ARMs could receive a payment reduction.

Click here for the full story

MSN

Sell your home fast in any market

Due to the large number of available homes on the market, and the fact that the traditional home-buying season is coming to a close, sellers need to be aware of key factors that can determine whether their home sells quickly or lingers on the market.

MAKING SENSE OF THE STORY FOR CONSUMERS

Accurately pricing a home continues to be the number one factor to conclude a successful sale. Most REATLORS guide sellers in determining an accurate listing price for their home by tracking comparable properties in their neighborhood that have sold within the previous three to four months. Since the market can greatly fluctuate from one neighborhood to another, some REALTORS believe that setting a price based on comps older than three to four months will not accurately reflect the current market and could result in pricing a home at odds with current market conditions.

Even in today's market, sellers do have some control over many contingencies. Some buyers may request that their contracts include contingencies based on their ability to obtain financing. To avoid risks associated with this contingency, some REALTORS advise their clients to request buyers to provide a pre-approval letter from a well-established lender; a financial information sheet outlining the buyer's employment history, income, assets and liabilities; and a recent bank statement showing that the buyer has enough funding reserves for the required down payment. This ensures that the buyer is likely to be approved for a mortgage loan, and reduces the risk to the seller.

Some buyers may use a home's inspection report as a bargaining chip to negotiate a lower price. When this occurs, some sellers offer buyers a lump sum of money so the buyer can make the repairs, rather than the seller repairing each item listed on the report. Sellers may be able to avoid paying a lump sum to the buyer by having the home pre-inspected prior to listing. This enables the seller to obtain accurate estimates for the cost of repairs ahead of time and provides the seller with the option of making the repairs before listing the home.

Click here for full story

CNBC

Brokerage Asks Sellers to Cut 10% off Home Prices

In an attempt to lure potential buyers off the sidelines, a nationwide real estate brokerage is asking its approximately 25,000 sellers who have homes listed with its brokers to reduce their listing prices by as much as 10% for its first national, 10-day sales event. 

MAKING SENSE OF THE STORY FOR CONSUMERS

According to a recent Coldwell Banker survey, more than half of its real estate agents said listing prices in their market are still too high to attract qualified buyers. The brokerage is hoping that the 10-day price reduction will entice home buyers to venture back into the market and help reduce the current supply of unsold homes. In California, C.A.R's Unsold Inventory Index for existing single-family detached homes in August 2008 was 6.7 months. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.

Buyers who are uncertain if now is the right time for them to purchase a home should consider the price of the home, along with the recent reduction in mortgage rates, which could reflect a sizable savings. According to the primary Mortgage Market Survey, 30-year fixed-rate mortgages averaged 5.94% with an average .6 points for the week ending Oct.9. This is a decline from the previous week when fixed-rate mortgages averaged 6.10%. Last year at this time, the 30-yr fixed-rate mortgage averaged 6.4%.

Click here for full story

In Other News...

Los Angeles Times: Countrywide mortgage pact may be worth $3.5 billion to California loan holders? 

Los Angeles Times: How much foreclosure relief will homeowners get from bailout plan?

Sacramento Bee: Rescue bill won't curb region's foreclosures, experts say 

Mercury News: Forecast calls for continued drop in home prices

Mercury News: Freddie, Fannie cut back mortgage fees

Wall Street Journal: California Officials Try to Avoid Second Housing Hit

CNN Money: Consumers rein in borrowing 

C.A.R e-Blasts are published by the California Association of Realtors

Emergency Economic Stabilization Act--Letter from C.A.R

Friday, October 03, 2008

Brought to you by the California Association of Realtors

Dear C.A.R Member;

Earlier today, the U.S House of Representatives approved the Emergency Economic Stabilization Act by a 263 to 171 vote. The legislation was quickly signed into law by President Bush, capping what has been a very tumultuous two weeks for the credit and financial markets.

This was a difficult decision for our elected representatives to make, especially given the abbreviated time period for review and debate that the gravity of the situation warranted. While passage of the Act should enable the credit markets and the U.S financial system to set the stage for their eventual recovery, this was only the first step in what will likely take weeks and even months to wend its way through the system before reaching Main Street. 

But it was an important first step. The health of the nation's housing market is critical to the financial well being of every household in the country, and is front and center here in California.

Here's what the legislation does:

Helps American families keep their homes by requiring the Treasury Dept. and any federal agency that owns or controls troubled mortgages to modify those mortgages wherever possible; this may include reducing the principal or interest rate; and extends till the end of 2012 the exclusion from federal income tax of mortgage debt forgiveness. 

Addresses the credit crisis by allowing financial institutions to immediately sell $250 billion in troubled assets to the U.S Treasury Department under the newly created Troubled Assets Relief Program (TARP). Another $100 billion would be made available upon the President's request.  Should the President deem it necessary, and with Congressional review, the Treasury Dept. may utilize the remaining $350 billion;

Protects taxpayers by allowing the Treasury Dept. to take an ownership stake in participating companies. In addition, if after five years TARP has incurred a net loss, the President must propose legislation that would force participating companies to reimburse the government to make up the difference;

Sets up an insurance program, funded by the financial industry, to guarantee companies' troubled assets, including mortgage-backed securities purchased prior to March 14 this year;

Curbs executive pay for companies utilizing TARP;

Sets up two oversight committees, a Financial Stability Board, and a congressional oversight panel, to which the Financial Stability Board would report;

Creates renewable energy tax breaks for individuals and businesses, including a deduction for the purchase of solar panels; as well as continuing other tax breaks that were set to expire; and extends relief from the Alternative Minimum Tax (AMT by another year;

Allows the SEC to suspend the required mark-to-market accounting standards and orders a study to be done on the rule's impact on financial institutions;

Shields bank deposits by temporarily raising the FDIC insurance cap to $250,000 from $100,000; and temporarily increases the federal insurance level for credit union savings to $250,000, both till the end of 2009.

We're appreciative of the efforts of our congressional leaders in both houses as well as of our peers at NAR. Their efforts helped secure adequate protections for both consumers and taxpayers, as well as stricter oversight protocols than what were initially contained in the legislation. C.A.R will continue to study and report to you additional information and analysis through our weekly e-mail newsletters.

Sincerely,

William E. Brown

2008 President

California Association of Realtors

Market Matters Advisory, Thursday Sept 18th

Welcome to the Market Matters Advisory, your weekly guide to responding to the market.

LA Times

Has the housing market hit bottom? 

In some areas, foreclosures are increasing, housing inventories are higher than normal, and even well-qualified borrowers cannot receive mortgage loans. Many homeowners and home buyers are also becoming increasingly concerned about when the housing market will reach bottom. Although some areas, such as the Inland Empire and the Central Valley, appear to already have experienced the bulk of their price declines, other markets, such as the San Francisco Bay Area and Southern California may still see home values decrease further, according to some analysts.

MAKING SENSE OF THE STORY FOR CONSUMERS

Some economists are comparing the current real estate cycle to the 1990s but the origin of this cycle is different from that of the last decade. During the 1990s, a higher rate of unemployment and many other economic factors triggered the downturn, contributing to weak sales for a five-year period. The current real estate market is different in that sales declined at a quicker pace during 2006 and 2007, but have shown marked improvement in 2008. In July home sales remained above the 400,000 level for the third consecutive month. 

Although home prices in California appear to be high compared with incomes, the current cycle has allowed home prices in CA to become realigned with incomes. Affordability increased dramatically in the second quarter of this year, and is currently at 48%, meaning that nearly half of the state's households can afford to purchase an entry-level home in CA. Some economists predict that the housing market will have several "false starts" meaning that there may be periods when home prices reach a plateau or may even increase for a brief period, and then decrease again. Although home prices have not yet stabilized, home sales are increasing. It is also important to note that real estate is cyclical and prices will eventually rebound, correcting the market.

FULL STORY

Wall Street Journal

U.S to take over AIG in $85 billion bailout; central banks to inject cash as credit dries up

American International Group Inc. (AIG), one of the world's biggest insurers, signed an $85 billion deal with the federal government earlier this week. This deal prevents AIG from entering bankruptcy and in turn the government receives a 79.9 percent equity stake in the company.

MAKING SENSE OF THE STORY FOR CONSUMERS

Because of the unusual nature of AIG bailout--AIG is not directly regulated by the federal government---some consumers may not fully understand the terms of the agreement, and may view it as another burden to taxpayers. However, the agreement with AIG differs from the life line provided by the Federal Reserve to Bear Stearns earlier this year. Under terms of the AIG agreement, the federal government is providing AIG with a two-year, $85 billion loan at 11.5% interest. In return, the Fed is receiving a 79.9% equity stake in the company, providing an opportunity for taxpayers to benefit if AIG should return to profitability.

Because AIG owns more than two dozen companies licensed to transact insurance in CA, some consumers may be concerned about the ability of the company to pay its claims. However, it appears that AIG's reserves are more than adequate at this time. In the unlikely even that the subsidiaries are unable to pay claims, the state's insurance regulator will take control of the firm assume responsibility for the necessary payments.

FULL STORY 

Sacramento Bee

Short sales a win-win--or a minefield

With more homes going to default, and more homeowners unable to qualify for loan modifications, short sales are becoming a viable alternative for many. However, these transactions can be complicated and often require more paperwork and time than a more traditional sale.

MAKING SENSE OF THE STORY FOR CONSUMERS

Short sales are designed to offer homeowners and banks an alternative to foreclosure. Generally this tactic is employed during real estate downturns, when it becomes more difficult for a homeowner to sell the property for an amount equal to or greater than the amount owed on the original loan. Short sales can be a win-win because they allow sellers to avoid foreclosures and can be less damaging to the seller's credit score than a foreclosure. With a short sale, buyers have an opportunity to purchase a home at a more affordable price.

Short sales are often more time intensive than a traditional transaction and often require more paperwork. Because some banks are overwhelmed with short sale offers, it is important that the seller working closely with their REALTOR to provide all of the necessary paperwork to ensure that the bank can accurately assess the situation and make a decision that benefits all parties. Sellers who opt for a short sale may best be served by a REALTOR who has experience working with short sales and is familiar with the required paperwork.

FULL STORY

In Other News....

Sacramento Bee: Amid bank woes, insured deposits safe

LA Times: Hitting bottom? What the experts say

30-yr mortgage rates drop below 6%

San Francisco Chronicle: State's home buyers seek bargains, move slowly

Wall Street Journal: Supply of homes for sale declines in metro areas

The Mercury News: mortgage rates falling, but nervous home buyers may stay on sidelines

CNN Money: New housing construction at 7-yr low

Talking Points--Here's What to Tell Consumers

Although the nation's banks appear to be in less danger of failing today than they were during the savings and loan crisis of the late 1980s and early 1990s, some consumers may need reassurance that their loan or bank account is secure. Financial institutions report their financials to regulators, who in turn rate their soundness. Regulators do not disclose their ratings to the public, but there are a wide variety of private firms that analyze the data reported to regulators and generate their own ratings for consumers. The ratings are based on a variety of factors, including the institution's net worth, problem loans, profit or losses, cash on hand and reserves for losses.

Although some companies charge for their ratings, others such as Bankrate Inc. and BauerFinancial Inc. provide free access to their ratings on all 17,000 US banks, savings and loans, and credit unions, using the Star System, where one star indicates the lowest rating possible and five stars the highest. The Federal Deposit Insurance Corp's site also lists 11 private firms that provide reports online, by mail or by phone. 

C.A.R e-Blasts are published by the California Association of Realtors

Market Matters Advisory, Thursday Sept 11th

Welcome to the Market Matters Advisory, your weekly guide to responding to the market. 

Fannie Mae and Freddie Mac Placed into Government Conservatorship

Fannie Mae and Freddie Mac, government sponsored enterprises (GSEs), were placed into a conservatorship Sunday by the U.S Dept. of the Treasury. The Federal Housing Finance Agency (FHFA) will serve as the conservator, and the CEOs of each company were relieved of their duties. Replacing them are Herbert Allison, former Merrill Lynch vice chairman, and David Moffett, former U.S Bancorp CFO, who will now lead Fannie Mae and Freddie Mac, respectively.

MAKING SENSE OF THE STORY FOR CONSUMERS

Under the conservatorship, the FHFA has the authority to take up to an 80% stake in the companies, and will review both GSEs' financial condition quarterly. The federal government may inject capital into Fannie Mae and Freddie Mac if needed. Both GSEs will be allowed to increase their mortgage funding over the next year and a half, and their stock will continue to trade, with stockholders retaining all rights in the stock's financial worth. However, the plan does call for a 10% reduction per year to GSEs portfolios, beginning in 2010, until they have been reduced to 250 billon.

Although the conservatorship has resulted in lower interest rates for consumers, and restored investor confidence, C.A.R is concerned that the Treasury and new CEOs will change the mission of role of GSEs. Without GSEs, mortgage capital eventually will be less predictable and more expensive. This may result in adjustable-rate mortgages becoming the standard for home buyers, as well as higher down payment requirements, and the possible disappearance of the 30-yr fixed rate mortgage.

C.A.R supports a structure that maintains GSEs in their current countercyclical roles and is urging lawmakers to support continued government involvement in supporting the institutional secondary market. As a result of these concerns, C.A.R will be asking Congress to enact legislation to ensure GSEs continue to fulfill their congressional mission of supplying an affordable and stable flow of capital for home loans.

C.A.R PRESS RELEASE ABOUT CONSERVATORSHIP

Additional Articles

How the Fannie and Freddie Takeover Affects You

It's a hard time to get new credit

Fannie and Freddie 101

Q%A about mortgage giants Fannie Mae, Freddie Mac

What rescue means for mortgage rates

CNN Money

Your home: When it's wise to downsize

As a result of reaching retirement age and becoming empty nesters, more baby boomers are choosing to downsize from large, multi-room homes to ones with less square footage. While some buyers are choosing to downsize to save money, others--especially those still in the workforce--are opting for a lifestyle change, such as a shorter commute; the convenience of an onsite fitness center, often found in condominium communities; or energy savings.

MAKING SENSE OF THE STORY FOR CONSUMERS

Some buyers are choosing to downsize to condominiums, as they are often located in close-proximity to sops, restaurants, transportation; and everyday needs such as grocery stores, dry cleaners, or the pharmacy. Although this is convenient, buyers who wish to save money by downsizing should weigh all the facts before making the decision to downsize. While most single-family homes incur costs such as property taxes, utilities, and home maintenance, most condominium communities require owners to pay monthly homeowner association (HOA) fees, and sometimes special assessments. The monthly dues and special assessments are generally used for items such as replacing a swimming pool, upgrading the community clubhouse, or adding new amenities. Buyers concerned about these costs should ask how much HOA fees have risen over the past five years, and whether the association has plans for new assessments in the near future. 

Even with the added costs, many buyers will realize an annual savings when downsizing. Some experts estimate that the average annual savings in utility costs and property taxes could be as high as $3,900 if a buyers downsizes from a 2,800 sq-ft residence to one that is 1,800 sq ft. 

Buyers who are at or near retirement should consider acquiring a mortgage loan with a 15 yr maturity or a traditional 30-yr fixed rate loan that does not charge a prepayment penalty. Although payments on a 15-yr mortgage are higher and the interest rate is only about .10% lower than a traditional 30-yr fixed rate loan, borrowers can save approximately $141,000 in interest over the life of the loan.

If a borrower elects for a traditional, 30-yr fixed rate loan, they should consider one without a pre-payment penalty. This allows the borrower to make extra payments each month and pay off the mortgage more quickly, without adding additional pressure should their financial situation change.

Full Story

San Francisco Chronicle

Negotiating Skills Vital to Home Purchase

With the high inventory of homes on the market, and an average time on the market of about 50 days for an existing single-family home in CA, buyers have more room to negotiate. Although sale price is a large factor during the negotiation process, many REALTORS are advising their clients that the motto of "it doesn't hurt to ask" can be used to negotiate other contingencies, such as inspection reports, closing costs, and the like.

MAKING SENSE OF THE STORY FOR CONSUMERS

While there are many homes to choose from, buyers should understand that homes in many affluent neighborhoods are still selling quickly and in some cases also are garnering multiple offers. Experts advise that a buyer should work with their REALTOR when negotiating the sale price, and also to ensure that the offer is realistic when serious about purchasing a home in one of those communities. 

Buyers who are looking for the best-deal possible should consider homes that have been on the market for longer than is typical for their area and whose listing price has remained unchanged. Buyers also should consider making second offers on homes that the seller may have intitially rejected. Due to seasonality and the length of time the home has been on the market, some sellers may accept a lower offer than they originally planned.

In addition to the sale price, some REALTORS are advising sellers to negotiate on inspection reports. In today's market, some sellers may be more willing to pay to repair, or negotiate credit for repairs that arise during home inspection. 

Full Story

IN OTHER NEWS...

LA Times

Pending home resales fall 3.2%

Foreclosures accelerate to fastest pace in almost three decades

The Mercury News

House hunting with a mobile phone

Market Snapshot

This week C.A.R is introducing Market Snapshot, a new feature that will appear monthly in Market Matters. Created by C.A.R's research and economics team, Market Snapshot offers REALTOR information about the current market, and provides consumer-friendly charts and graphs.  CLICK HERE to visit C.A.Rs website, where you can view Market Snapshot. 

brought to you by California Association of Realtors (C.A.R)

C.A.R Market Matters, August 28th

Thursday, August 28th, 2008

Welcome to the Market Matters Advisory, your weekly guide to responding to the market. 

Barron's

The Endgame Nears for Fannie and Freddie

Shares of Fannie Mae and Freddie Mac have declined by approximately 90% from the previous year and both companies are reporting quarter-over-quarter losses, leading some to believe that a government takeover or complete privatization is imminent.

MAKING SENSE OF THE STORY FOR CONSUMERS

According to the Barron's article, which states "should the agencies fail to raise fresh capital, the administration is likely to mount its own recapitalization, with Treasury infusing taxpayer money into the enterprises," consumers would be led to believe that a government bail out is the only option. Although a cash infusion may be needed, it is not likely that the Treasury would purchase an equity stake in either Fannie or Freddie. Additionally, the Treasury Dept. must negotiate an agreement with the GSEs. Fannie and Freddie continue to raise capital own their own and some reports show that the GSEs are looking for private-equity firms or outside investors to provide the financing, which would help raise capital and reassure Wall Street.

The article also states, "In the early 1980s Fannie was effectively insolvent, but the government allowed it to continue operating." Many consumers are not aware of how the GSEs serve the market or what their roles are. Unlike banks, which lend directly to consumers, Fannie Mae and Freddie Mac operate in what is known as the "secondary mortgage market." They purchase or guarantee loans from direct lenders in the "primary mortgage market" and either hold onto them until they mature, or sell the loans in the form of mortgage backed securities. By the GSEs guaranteeing or purchasing the loans from banks, Fannie and Freddie are able to fulfill their congressional mission and supply an affordable and stable source of capital to lenders, allowing them to offer more home loans.

Due to tighter lending standards, it is becoming increasingly more difficult for borrowers to secure home loans. If Fannie Mae and Freddie Mac did not guarantee or purchase primary lenders' loans, the cost of homeownership would dramatically increase as lenders would experience an even greater capital shortage.

Many financial institutions in the mortgage business are experiencing losses, and while the GSEs are no exception, their portfolios continue to outperform the majority of lenders in the market. Additionally, unlike private investors which seem to have abandoned the mortgage market, Fannie Mae and Freddie Mac are fulfilling their congressional mission to provide an affordable and stable flow of capital to home-loan lenders.

FULL STORY

Yahoo News

Consumer Outlook Up, Worst May Be Over for Housing

Primarily as a result of lower gas prices, consumer confidence increased in August, with The Conference Board's consumer conference index rising to 56.9, up from the revised 51.9 reading in July. Following a six month decline, August was the second consecutive month that the index increased. A reading of 100 is considered the highest rating possible. In a separate report, new home sales posted an unexpected increase in July, while the Standard & Poor's/Case-Shiller U.S National Home Price Index showed prices declined at a slower rate in the second quarter, indicating that some areas may have reached the trough in home price declines.

MAKING SENSE OF THE STORY FOR CONSUMERS

The conference Board's consumer conference index measures how consumers perceive the current conditions and future expectations of the US economy. The index is based on a survey of 5,000 U.S households.

The monthly survey details consumer attitudes and buying intentions. Increased consumer confidence generally indicates that consumers are more willing to make purchases. Decreased confidence indicates that consumers are likely to slow their spending.

Although the Conference Board's Present Situation Index declined to 63.2 in August, compared with 65.8 in July, consumers expect the economy to improve over the next six months, as indicated by The Conference Board's Expectations Index. The Expectations Index increased by 10 points, the largest increase since November 2005.

FULL STORY

USA Today

Home Prices in Record Tumble, but some find Hints of Recovery

Although home prices decreased 15.4% during the second quarter compared with the same period a year ago, in month-over-month comparisons, home sales are increasing, according to the Standard & Poor's/Case Shiller U.S National Home Price Index. According to the Office of Federal Housing Enterprise Oversight's home price index, states with the largest annual declines include CA at 16%, FL at 12%, AZ at 9%, and RI at 5%. Existing home sales increased in July and exceeded many economist's expectations, while new home sales also increased 2.4% for the same time period.

MAKING SENSE OF THE STORY FOR CONSUMERS

Although home prices are decreasing, existing home sales are increasing nationwide and in CA. In CA, single-family, existing home sales increased 43.4% in July compared with the same period a year ago. Sales in July remained above the 400,000 level for the third consecutive month, with deeply discounted, distressed sales continuing to drive volume in many regions of the state.

The state's unsold inventory index (UII) for existing, single-family detached homes decreased to 6.7 months in July 2008, compared with 10 months (revised) for the same period a year ago. The UII indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.

FULL STORY

In Other News...

San Jose Mercury News

Lenders Remain Wary of Real Estate Investors 

Reuters

More Owners Say Their Homes Depreciated: Survey

Home Buyers Hold Fate of U.S Economy

Forbes

America's Most Distressed Housing Markets

CNN Money

Paulson's Fannie Freddie Fix

San Francisco Chronicle 

Home Sales in State Soar as Prices Plunge

TALKING POINTS

What to tell consumers--

Despite the high inventory of homes on the market, sales of deeply discounted, distressed properties are increasing and the Unsold Inventory Index (UII))--which indicates the number of months needed to deplete the supply of homes on the market at the current sales rate--is declining. With sellers often in competition with banks when selling their home, it is important for sellers to be aware of some best practices to help them sell their home. With guidance from their REALTOR, consumers need to carefully consider the importance of realistically pricing a home, properly staging their house prior to putting it on the market, and playing up the home's strengths.

While it may be common knowledge to REALTORS that the first offer is often the best, some sellers may not feel the same way. Many believe that if the first potential buyer makes an offer close to the asking price, future offers may exceed it. In many instances, this is not the case, and subsequent offers often are for less, especially in a declining market.

Brought to you by the CALIFORNIA ASSOCIATION OF REALTORS

C.A.R Market Matters, August 21st

Welcome to the Market Matters Advisory, your weekly guide to responding to the market. 

San Francisco Chronicle

Real estate chaos hits appraisal industry

As a result of the current market and a return to proper underwriting guidelines, appraisers are finding it increasingly difficult to get lenders to accept appraisals. Some lenders are even declining low appraisals and scrutinizing loan applications more carefully than in previous real estate cycles. whereas most lenders used to evaluate a home appraisal's credibility based on comparisons generated from their desk, now some banks are requesting that appraisals be verified by on-site visits to the property, as well as the nearby homes listed as comparables.

MAKING SENSE OF THE STORY FOR CONSUMERS

Since real estate markets are local and prices can greatly fluctuate from one area to the next, experts recommend that sellers and REALTORS work with local appraisers that have knowledge of that region.

Similar to utilizing a REALTOR versus a sales agent, it is recommended that sellers work with an appraiser that is a member of the Appraisal Institute or the American Society of Appraisers, the appraisal industry's two largest trade groups. Appraisers that are members of these organizations are required to complete more coursework than those just licensed by the state.

Because some lenders are declining appraisals, some mortgage brokers recommend that buyers leave their financing contingencies in place until the lender has signed off on the appraisal.

FULL STORY

US News and World Report

How the Housing Law Affects Reverse Mortgages

The recently signed federal housing bill has many provisions, including changes to reverse mortgages, which are loans against a house that the borrower is not required to pay back as long as they live in the home. Some of the amendments include raising the amount that seniors, age 62 and older, can borrow using a federally backed reverse mortgage; and lowering the cost of receiving the home's equity. Some aging experts advise consumers to be cautious before refinancing into a reverse mortgage.

MAKING SENSE OF THE STORY FOR CONSUMERS

Although seniors can access their home equity by refinancing into a reverse mortgage, many of these loans come with a variety of fees. Once the fees are paid, borrowers may choose to receive a lump sum payment, monthly payments, a credit line, or a combination based on the home's value. A provision in the housing bill reduces the maximum fee to 2% on the initial $200,00 of a home's value and 1% on the remaining balance, with a maximum set at $6,000. Some lenders charge less fees, so similar to finding a traditional mortgage, consumers should shop around and negotiate with their lender on these fees. In some cases, closing costs, service fees, mortgage insurance premiums, and interest rates can also be negotiated.

Most reverse mortgages are Home Equity Conversion Mortgages (HECM), which are backed by the Federal Housing Administration. In order for a borrower to qualify for a HECM, they must discuss the loan with a loan counselor employed by a non profit or public agency approved by the U.S Dept of Housing and Urban Development. This ensures borrowers understand all of their options and make the right decision. 

Some borrowers may not understand that although the loan does not have to be repaid, as long as they remain in the home, they are still responsible for property taxes, insurances, utilities, fuel, and maintenance, and other homeowner expenses. If some of these items are not kept up to date, the borrower risks the lender calling the loan due. It is important to note that reverse loans must be paid back with the proceeds, along with any remaining equity, if the home is sold.

FULL STORY

Los Angeles Times

Good news for California Housing

Home sales in Southern California increased in July compared with a year ago, while foreclosures decreased in month-over-month comparisons, according to a recent report. The California Legislature also is working with consumer and lending groups on a bill that would protect consumers from predatory lending and establish guidelines and restrictions on brokers and lenders.

MAKING SENSE OF THE STORY FOR CONSUMERS

Although the foreclosure rate is approximately double what it was a year ago, in month-over-month comparisons, it is 8% lower, indicating that foreclosures could be reaching a plateau. In a report released by RealtyTrac, default notices, which are the first phase in foreclosure proceedings, declined 4% from June. 

If signed, the bill will prohibit lenders from offering a pick-a-payment loans to subprime borrowers; establish limits and timeframes on prepayment penalties to subprime borrowers; amd prohibit brokers from leading subprime borrowers into loans with higher interest rates if they can qualify for one with a lower interest rate.  The bill also would prohibit lenders from paying a financial incentive to brokers for steering borrowers into loans with prepayment penalties or higher interest rates. Additionally, mortgage brokers would be required to place the consumer's financial interests above their own.

FULL STORY

In Other News...

Reuters

Home Builders Stay Grim in August

Housing Starts and Permits Tumble in July

Press Enterprise

Foreclosures push Inland Home Sales Up, Median Prices Down

SF Chronicle

Home Values Hold in Few Places in Bay Area

Talking Points

Here's what to tell consumers

Many mortgage brokers are finding that consumers do not fully understand the home loan process and as a result, make mortgage mistakes. Some common mistakes that borrowers make are: not cleaning up their credit; failing to search out first-time home buyer programs; paying junk fees; and not planning for closing costs.

Borrowers can increase their chances of being approved for a home loan by requesting their credit report and FICO score at least six months prior to applying for a loan. This allows the consumer to dispute errors and pay any outstanding debt.

Borrowers should also seek out a first-time buyer program because they often offer better interest rates and terms, and some even are tailored to people with poor credit or can assist those that do not have enough saved for a down payment. 

To avoid paying junk fees, such as those charged for "document preparation," for example, a borrower can use a mortgage broker or call a variety of lenders to compare loans, interest rates, and fees.

Some borrowers are shocked when they realize that they must bring cash to the closing table, typically anywhere from 2 to 7% of the home's selling price. To avoid this "sticker shock" experts recommend that borrowers get a good-faith estimate from their lender early in the loan process. 

C.A.R e-blasts are published by the CALIFORNIA ASSOCIATION OF REALTORS, a trade association representing nearly 200,000 REALTORS statewide.