-
Your Host
Brought to you by Ron Ares, an Oregon broker licensed with MRealty.
Contact: (503) 460-7992
Follow Along
Subscribe in a reader
New Administration Program Pays Owners to Take Short Sale Option
New solutions from the Obama administration for the housing crisis continue to emerge.
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.
Federal Housing Support Ends Soon. Then What?
I’ve been pondering how the housing market will fare as federal support programs wind down.
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.
Why Your Bank May Not Be Interested in Working Out Your Mortgage Problem
Lost in the breathless excitement surrounding low interest rates and homebuyer tax credits are the stories of beleaguered homeowners trying to work out their mortgage problems with their lenders in lieu of foreclosure.
Here’s a 4-minute video showing why (some) banks aren’t really interested in HARP refinances or modification:
Hat tip to Ralph Olson at Pacific West Appraisal.
FHA Raises Borrower Requirements, Increases Fees
It’s an FHA-kinda day here at re:PDX.
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.
HUD Temporarily Suspends FHA Anti-Flip Rule
Starting February 1, the Department of Housing and Urban Development will temporarily suspend a rule in FHA lending that prohibited lending on a home that had been previously owned for less than 90 days.
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.]
New RMLS CEO & President appointed
Big news yesterday at RMLS headquarters as Kurt von Wasmuth was appointed as the new CEO and President of Oregon’s largest multiple listing service.
A long-time RMLS employee, Kurt has worked his way through the ranks at RMLS and, according to the RMLS Board of Directors Executive Search Committee, clearly distinguished himself from the other candidates interviewed for the position.
This is good news for the Realtors in the Portland/Vancouver metro area because Kurt’s appointment offers leadership continuity and also a firm grasp of the challenges ahead for the MLS — issues like declining membership due to housing market conditions, rapid technology advances, and sea change in the MLS industry in general.
Kurt succeeds Beth Murphy, who retired in December.
September Case-Shiller Show National Prices Recovering, But Portland Remains Flat
From today’s Standard & Poor’s Case-Shiller report:
Data through September 2009, released today by Standard & Poor’s for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, show that the U.S. National Home Price Index improved in the third quarter of 2009, posting its second consecutive quarterly increase and further improvement in its annual rate of return.
Portland registers 14th out of 20 cities monitored by the Case-Shiller index for 1-year home price performance. A half-point dip in September vs. August home prices puts the Portland metro area at a 12% decline in home prices over the past 12 months. The 20-city index registered an average 8.9% drop.
More from the report:
As of the 3rd quarter of 2009, average home prices across the United States are at similar levels to what they were in autumn 2003. The 3rd quarter values show improvement over the previous two quarters of 2009 and have risen well off their recent bottom. The 10-City and 20-City Composites continue to show monthly improvement in their annual return figures. Both composites emerged from double-digit annual declines with September’s report, the first time in 21 months. In addition, 19 of the 20 metro areas saw improvement in their annual returns compared to the previous month, Cleveland being the only exception.
Here are the September Case-Shiller numbers, with metropolitan areas sorted by 1-year change.
| Metropolitan Area | Sept-09 Level |
Sept./August Change (%) |
August/July Change (%) |
1-Year Change (%) |
| Denver | 129.45 | -0.50% | 1.00% | -1.20% |
| Dallas | 120.57 | -0.70% | 0.20% | -1.20% |
| Boston | 155.62 | -0.20% | 0.90% | -3.30% |
| Cleveland | 105.75 | -1.60% | -0.50% | -3.70% |
| Washington | 180.45 | 0.50% | 1.80% | -5.00% |
| San Diego | 154.76 | 0.90% | 1.60% | -5.70% |
| San Francisco | 134.16 | 1.30% | 2.80% | -7.80% |
| Charlotte | 119.84 | -0.70% | -0.40% | -8.10% |
| New York | 174.38 | -0.30% | 0.60% | -9.00% |
| Los Angeles | 167.93 | 0.80% | 1.60% | -9.00% |
| Atlanta | 111.26 | 0.00% | 1.10% | -9.30% |
| Chicago | 132.13 | 1.20% | 1.70% | -10.60% |
| Minneapolis | 124.96 | 1.80% | 3.10% | -11.20% |
| Portland | 149.72 | -0.50% | 0.30% | -11.80% |
| Seattle | 148.94 | -0.40% | 0.10% | -13.80% |
| Miami | 149.69 | 0.50% | 1.10% | -16.20% |
| Tampa | 142.57 | -0.60% | 0.40% | -16.70% |
| Detroit | 72.9 | 1.80% | 1.90% | -19.20% |
| Phoenix | 109.26 | 0.80% | 1.60% | -21.80% |
| Las Vegas | 104.82 | -0.90% | -0.30% | -28.60% |
| Composite-20 | 146.51 | 0.30% | 1.20% | -9.40% |
Vegas, Phoenix and Detroit continue to drag behind the rest of the country with -28%, -22%, and -19% year-over-year declines. Denver and Dallas home values have held up quite well in the past 12 months.
Homebuyer Tax Credit Lives On, and Expands
It appears we can take off the “First Time” prefix and and just call it the “Homebuyers Tax Credit.” The government’s housing stimulus plan continues past its original November 30 deadline and actually grows in scope.
The Senate and House have approved a bill extending the $8,000 tax credit and offering move-up buyers a similar $6,500 benefit. President Obama is expected to sign this quickly, since the bill contains unemployment benefit provisions as well.
Here’s the latest:
- The tax credit would be $8,000 for first-time home buyers and $6,500 for move-up buyers (from December 1, 2009 to April 30, 2010).
- Move-up buyers will be eligible, as long as they have lived in their principal residence at least 5 years.
- Contracts through April 30, 2010 will qualify, but closing must occur within 60 days.
- The income limits have been raised–$125,000 for single return and $225,000 joint return for both first-time and move-up buyers.
- Cost of the home may not exceed $800,000 to be eligible.
- Taxpayers will be able to claim the credit on their 2009 income tax return for purchases made in 2010.
- Home buyers would not have to repay the credit, as long as the home remains their principal residence for 36 months after the purchase date.
More people will qualify for the plan (high income earners and current homeowners). And the tax credit will sunset just as the peak real estate season is ramping up.
So the question remains, does this expansion move your housing timetable up? Sound off in the comments, please.
Update on First-Time Buyer Credit: Will It Stay or Will It Go?
Diana Olick at CNBC covered HUD Secretary Shaun Donovan’s address before the Senate Banking Committee October 20. Sounds like HUD isn’t so sure that the credit will continue:
I am also aware of the strong support in Congress for doing more to support the housing market, including extending the First Time Home Buyer Tax Credit beyond 2009. At the same time, I am mindful that these proposals can be very expensive, especially at a time of significant budget deficits. I can assure you the Administration will work with Congress to fashion appropriate and effective home buyer incentives, mindful of both their benefits to stimulating new demand and their costs to the American taxpayer.
Politicians on both sides are taking a hard look at the expense of the stimulus vs. the potential effects of stalling the momentum the market has made through the year. Sounds like a decision is still weeks away.
Full commentary at http://www.cnbc.com//id/33398833.
National Index Improves, Portland Follows Trend
July’s Standard & Poor’s Case-Shiller home price index shows continued month-over-month improvement across most index cities. Of the 20-city index, only Seattle and Las Vegas showed monthly declines.
In Portland’s case, the home price index improved 1.1% over June’s number, which was up 1.0% over May’s result. This is consistent with the multiple listing service reports that show prices basically flat through most of 2009. The index pegs Portland’s July 2008 to July 2009 comparison at -13.9%.
Below is a chart of Portland, Seattle and the overall index. The green trace is San Diego, which some readers use as Portland’s bellwether city for forecasting purposes.
