I had not heard locally of a backlog, but I suppose homes that are short sales that are still awaiting lender approval could be affected.

More info at CNBC.

From the New York Times comes:

More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.

In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave. This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.

Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”

The full article at the New York Times.

First, the Federal Reserve will discontinue its purchase of mortgage-backed securities, which has artificially kept mortgage rates down. Then, the homebuyer tax credits will expire at mid-year, leaving the housing market to fend for itself.

How will it do?

The New York Times hit that subject today, and while Portland is no Elkhart, Indiana, I do worry about the second half of the year here.

…it is uncertain whether the government can really pull back without sending housing markets into another tailspin. “A rise in rates would kill us all by itself,” Ms. Swartley (Elkhart Realtor) said.

The Obama administration has offered few ideas about reforming the housing market. Proposals for the future of Fannie Mae and Freddie Mac, the mortgage holding companies taken over by the government at the height of the crisis, were supposed to be introduced with the president’s budget this month. They were not.

The government programs, however crucial, are distorting the market. The tax credit produced sales last fall, but some lenders here say it has troubling implications.

Troubling, indeed. Read the full NYT article here.

Photo by pfala, used under Creative Commons license.

Here’s a 4-minute video showing why (some) banks aren’t really interested in HARP refinances or modification:

Click here to view the embedded video.

Hat tip to Ralph Olson at Pacific West Appraisal.

In a move to minimize its own insolvency and avoid a bailout, the FHA is refining its lending guidelines and raising fees to borrowers.

In changes expected to occur in the first half of 2010, FHA-insured loans will require:

• Up-front mortgage insurance premiums to be 2.25% (up from 1.75% currently).
• Minimum FICO credit score of 580. Lower credit scores will require a 10% downpayment.
• Sellers limiting credits toward buyer’s closing costs and prepaid expenses to 3% (currently 6%).

From USA Today:

The changes, aimed at strengthening the FHA’s reserves in the face of rising foreclosures, shouldn’t hurt too many borrowers, officials say.

“We don’t expect this to have a significant impact on the housing market,” says FHA Commissioner David Stevens, adding that “the moves are designed to get the reserves back up.”

The FHA is playing a greater role in the mortgage market, insuring about 30% of new loans, up from 3% in 2007. Growing defaults have cut its reserves below the level mandated by Congress, leading to fears that it might need a taxpayer bailout.

The rule had been in place to reduce the practice of speculators flipping properties for quick profit, but large inventories of foreclosures prompted the administration to suspend the rule in hopes of accelerating the sale of vacant properties.

“As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers,” said Donovan. “FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization.”

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

The ruling will be in effect for one year. I don’t know if the ruling will have a significant effect on the Portland market in particular. Full text of the HUD announcement here.

[Photo courtesy of Lazurite, published under Creative Commons license.]

Q&A: Advice for navigating the housing downturn

Columnist Ryan Frank touches on a number of consumer questions regarding the housing market. And, scroll to the bottom of this story for more on how current home buyers are faring in the current environment.

Is PDX housing hitting a false bottom?

Ryan Frank follows up his article with a sundry rundown of housing information resources.

Modifying loans creates credit mess, not relief

Brent Hunsberger of The Oregonian’s money beat shares the perils of a couple local consumers seeking loan modifications, when proactively solicited by the lender. Caveat emptor.

Portland real estate prices stay level, sales on modest climb for May

RMLS official tabulations for May 2009 will come out next week, but my early review shows that closed sales continue a small month-over-month increase (a seasonal effect), and median and average sale prices were essentially flat from the previous month. Closed sales will show to be up 10% over April, but down by ~30% from one year ago. Both median and average sale prices are around 13% off levels from a year ago. Come back early next week for a full report.

Oregon foreclosures nearly double in a year

A recent tabulation of foreclosure activity in Oregon shows a nearly 90% increase compared to May 2008. One out of every 525 Oregon homes received a foreclosure filing in May–the nation’s 12th highest rate.

Oregon to get a head start on recovery?

Really? Why? From research by Moody’s:

High-tech industry is one element. A slowdown in technology spending in 2008 and 2009 has created a pent-up demand for technology — businesses that know they need to upgrade and are waiting for the ability to spend.

“States that have a high concentration in tech-related industries are well positioned to take advantage of this trend, which is particularly true of Colorado, Idaho, Oregon and Washington and to a lesser extent Texas,” said economist Andrew Gledhill of Moody’s Economy.com.

I certainly hope the prediction is true, but I suspect digging out of a 12% unemployment hole will take longer than expected. (And wasn’t Moody’s one of those rating companies that suggested those mortgage-backed securities were AAA rated?)

Bike community letting it all hang out

Last, but not least, the Portland bike community celebrates it’s version of the World Naked Bike Ride on June 13 with a series of events. If you’re in the vicinity of NE 39th and Glisan around 2PM, you’re bound to get an eyeful during the Sunny Nekkid Ride (fair warning!). The big event is at midnight, and last year, 2,000 riders participated.

Photo by jd.inaz. Used under Creative Commons license.

Unfortunately, there’s still some minutiae to navigate.

From the HUD press release:

The American Recovery and Reinvestment Act of 2009 offers homebuyers a tax credit of up to $8,000 for purchasing their first home. Families can only access this credit after filing their tax returns with the IRS. Today’s announcement details FHA’s rules allowing state Housing Finance Agencies and certain non-profits to “monetize” up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments. Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate.

Currently, borrowers applying for an FHA-insured mortgage are required to make a minimum 3.5 percent downpayment on the purchase of their home. Current law does not permit approved lenders to monetize the tax credit to meet the required 3.5 percent minimum down payment, but, under the terms of today’s announcement, lenders can now monetize the tax credit for use as additional down payment, or for other closing costs, which can help achieve a lower interest rate. Buyers financing through state Housing Finance Agencies and certain non-profits will be able to use the tax credit for their downpayments via secondary financing provided by the HFA or non-profit. In addition to the borrower’s own cash investment, FHA allows parents, employers and other governmental entities to contribute towards the downpayment. Today’s action permits the first-time homebuyer’s anticipated tax credit under the Recovery Act to be applied toward the family’s home purchase right away. Unlike seller-funded down-payment assistance, which was a vehicle for abuse, this program will allow homebuyers to shop for the best home price and services using their anticipated tax credit. [Emphases mine.]

The National Association of Home Builders (NAHB) estimates the Administration’s homebuyer tax credit will stimulate 160,000 home sales across the nation – over 60% of which will be first-time buyers who will receive the credit. The NAHB figures another nearly 60,000 existing homeowners will be able to buy another home because a first-time buyer purchased their home using this strategy.

Washington State loan originator Rhonda Porter hits the highlights on her mortgage blog. Jeff Belonger, at The FHA Expert, touches on the fine points of how the credit can can be applied.

Photo by Aaron Hockley, used under Creative Commons license. (No correlation to the article. I just like it.)

Approximately 14% of active listings are short sales and 4% are homes already foreclosed upon and returned to the bank (REOs). The worst hit areas are Gresham, Beaverton, and Happy Valley, where a quarter of the inventory is either a foreclosure or on its way.

One caveat: Many of the properties in short sale status have offers pending, but lender response times for these transactions can take several weeks, even months. Therefore, the short sale inventory lingers in active status much longer than typical transactions.

Here’s a breakdown by market area, as of May 27, 2009.

*Third-party approval usually means a bank must approve a sale. Sometimes it means the property is in an estate and requires approval by an executor, but I scrubbed most of those properties out of the data.

If dabbling in distress properties is your cup of tea, drop me a line and I’ll send you the list of properties in the areas you’re interested.

Data courtesy of RMLS.