Mortgage & Finance

Another GREAT Real Estate Information Exchange last night!

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It was a terrific turnout – we had 25 people attend.  Thanks for all who came out to be educated!  Here is a synopsis of what was discussed.  Hope to see more of you next time!

Scott MacDonald:

Market Update…builders have said activity and contracts have been up. The summer lull is gone and activity is picking up. Great news for us! In talking to other agents, they are saying the same thing. It’s important to tell your sellers that the market is still price sensitive. There is still activity, but it’s important to get the house priced right to get it sold quickly.  We are still seeing multiple contracts. BPO’s are picking up as well.

Leslie Wish – SunTrust:

Rates continue to be great.  Phones are ringing off the hook with buyers wanting to close by the end of the November.  It is better to close prior to Thanksgiving and not wait.

Lenders are skittish on condo loans because of litigation against the condo association – any litigation no matter who is suing whom, no conventional loans – FHA loans will allow “some” litigation.  Lender questionnaire will bring to light lawsuits and delinquencies.

Scott Mayhew – NuStart Credit Restoration:

Pull credit report to see what issues are with the report.  Typical problem takes 90-120 days.  Process starts with letter writing – it is a must.  The letter must state name, address, loan number, discrepancy, timeframe to correct and expectations of resolution.  Only way to dispute discrepancy is to state the loan is not late or not mine – this is the only way to get it removed.  The letter must be signed in blue ink.  Lender has thirty days to respond with exact amount owed and details of delinquencies.  Consumer must write letter – not company.  Proof of accuracy letter must be returned by lender – if not, need to send another letter stating they have violated.  Paying off credit cards end of month doesn’t give you a great credit score.  Inaccurate data CAN be removed from credit report.  If your mortgage is 30 days late, it will show up on your credit score is 100 point deduction, it used to be 40 points.  Credit rating goes from M1 to M9.  M5 is about a 40 point hit.  Tell short sale clients to have bank say paid in full as agreed and not to rate short sale higher than an M3.  Fee to correct is $395 one person $495 for two.

Keith Barrett – Champion Title

New HUD form is coming out January 1st – you have to be prepared if you want to keep clients happy.  Get caught up on all the changes at 4900 StoneCroft Blvd., Chantilly, VA 20151 on October 28 from 2pm to 4pm.

What in the world is going on in Northern VA real estate?

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Well, we are starting to see more activity lately at our listings, more homes are selling than are going on the market reducing our inventory levels, builders are seeing increased activity and sales as well, rates continue to fall, prices are remaining stable, and now is a fantastic time to be in the Northern Virginia real estate market whether buying or selling.  What else could contribute to our market?  We continue to have low levels of unemployment locally compared to the rest of the country – which is a huge positive for us.  As a matter of fact, Virginia was ranked number 1 for an example of how employment has affected their total real estate market.

 

What is on our forefront?  There continues to be the threat of more foreclosures coming on the market but we haven’t seen it here in our area yet.  We have the impending expiration of the First Time Buyer $8,000 Tax Credit or do we?  In speaking with the Former Governor, now Senator, Mark Warner, he indicated he was voting to extend the credit.  Many others in support of this initiative believe this will keep momentum moving in a positive direction with our recovery from the recession as the Housing Market has such a large impact on our national economy.  Interest rates may creep up – but they are so low, they have to increase at some point.  Basically, as stated above, we are fortunate we have the fundamentals to be one of the top real estate markets in the country.

Yesturday’s Economic Summit at GMU

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Michael Fratantoni 

 

-The true unemployment number is up to 13.3% (people who can no longer claim and still don’t have a job) but is report as 9.7% – it will peak midyear next year to a reported 10.2 % similar to the early 80’s

-No pressure on inflation –some deflation happening right now to keep it in check –as an example energy prices are down – a barrel of oil is in the $70’s when a price of $90 to $100 is normal

-Stock market losses $6 trillion slight rebound in Q1 & Q2

– New home sales lowest on record in 50 yrs

-Housing prices nationally are not going to rise until 2011 and won’t stabilize until mid 2010

-The Federal Reserve is largest buyer of MBS 60% currently and they hold $850 billion loans currently they have gone from 0% to 60 % this year and want to go back to 0% by year end.  Will going to 0% add volatility to market?  This is something to watch over the next 6 months when Fed leaves market increase in rates by .25 basis points – Just saw the Fed will buy MBS until March of 2010

-Theme things are looking up slightly but we have huge hole to climb out of

-FHA represented only 2% of loans in previous years.  This year they represent 45%!

-National delinquency survey show 14% of borrowers are 90 day or more late 2.5 million loans

-Prime fixed rate loans 28 million and many of those are reaching seriously delinquency rates – more than 90 days

-Delinquencies & foreclosures are delayed or lag behind employment trends

-Delinquencies – we are up because of jobs being lost

-25% of option arms have been modified or foreclosed on not the problem media has mentioned and continues to mentions as the problem in mortgage market

-Watch bill HR 1728 – Barney Frank

-Allen Jones BOA SS expert is available to us about Short Sales and BOA

Allen.h.jones@bankofamerica.com

Frank Nothaft

-Its going to get worse much worse slower recovery than previous recessions

-After end of 1991 recession unemployment peaked 15 months later

-After end of 2001 recession peaked 19 months later

-Bernanke says we may be out of recession – the question is how long before we peak with unemployment after this recession

-$15-17 billion is the cost to extend tax credit.  The challenge is too many politicians say they didn’t approve of spending gov’t funding to stimulate economy so even though they understood the need to extend they have politically painted themselves into a corner

-Freddie Mac National rebound of prices bottoms out in 2010 and it is 2011 before rebounding

-Lowest interest rate in 50 years

-Prime loans are performing worst since the 30’s – the depression

-Subprime 8 to 10% of loans represent over 35% of foreclosures

-9% of all loans are subprime but they represent 35% of foreclosures

13% of all loans are FHA and they represent 10% of foreclosures

15% of all loans are Prime/Arms and they represent 28% of foreclosures

63% of loans are Prime and Alt-A Arms and represent 27% of foreclosures

-4.2 million seriously delinquent 90 days behind

-To determine if loan is owned by Freddie Mac check out – http://www.makinghomesaffordable.com or http://www.Freddiemac.com

Lawrence Yun

 

No housing bubble it was a credit market bubble

We are overshooting bottom & need stimulus to nudge further back to make our market “normal” again

-From typical NAR survey 3000 responses – HVCC appraisal survey resulted in 30,000 responses1/3 had properties not close due to appraisals

Prices are below fundamental values

All cash purchases are 20 % of market typically low single digits 8 %

Foreclosures will rise because of toxic issues of unemployment & underwater buyers

Full builder recovery not until 2011

Our prices locally are down 20 % were 33 %

Stock market is at 1 year highs

Support tax credit extension  – Wall Street got $700 billion whole economic stimulus $800 billion extending the tax credit will only be $15 billion

NAR is on FB why aren’t you?

See his presentation below!

Stephen Fuller

 

View his updated slides in the link below!

Look for collaboration amongst our peers, share data, share ideas, work together get along 

We in DC are better at looking at bad news!

Dr. Frank Nothaft

Dr. Michael Fratantoni 

Dr. Lawrence Yun 

Dr. Stephen Fuller 

We’ve caught the 500 pound elephant…

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The economy isn’t as bad as we think it is or as the media portrays it to be…especially in our Washington Metro Area.  Dr. Stephen Fuller from GMU’s Center for Regional Analysis spoke to our office today regarding the current economy in our area including unemployment and the state of the housing market…and of course his forecasts for the future.

The future is uncertain. It always has been and as it should be. We can only predict so much. So Dr. Fuller believes that in 2010 and 2011 the housing market in the Washington Metro area is going to be out of control good or in his words it’ll go “gangbutsters”!  That’s pretty optimistic considering the last batch of Alt-A loans (5/1 and 7/1 ARMS) are due to adjust in 2011, but he did say to that end that the majority of those loans have already gone into foreclosure.

Unemployment in our area is down. It’s up around the rest of the nation and according to Dr. Fuller will go up to 10.2 nationally by April of next year before we see it start to come down again.  As of this last month, there is a 3.5 point gap between the national unemployment figure and the figure in our region. He noted that as a country we are losing 200,000 jobs per month and in order to keep employment where it is currently, we would have to accrue 100,000 jobs per month – again, we are losing 200,000 per month.  Employment won’t return to pre-recession numbers until 2014. That’s a heck of a lot of jobs! And half of those job losses are in the retail sector.  Thanks to amazon.com and all of the other internet retailers that offer goods for discounted prices. Store front retailers can’t keep up, end up in bankruptcy and leave buildings and strip malls vacant along with any customer service that might have been associated with it.  Big box retail shopping centers may get rezoned to accommodate housing short fall – stay tuned.

Dr. Fuller did comment on inflation and whether or not it will happen in the near future due to all of the spending our government has been doing lately. Will we have to endure a hard inflation period to “pay it all back”? His answer is not likely.  Unemployment is a major factor affecting our economy, but it’s not enough to put pressure on the economy to spark inflation. He noted that manufacturers are not struggling as hard as they would be during an inflationary period. This is in large part because of all the products you can purchase online. They costs of  not having a physical store, employees, etc. allows for the lower cost product and thus more profit in the long run. Therefore, if they continue to produce the goods, they continue to sell, then inflation shouldn’t occur…but that doesn’t mean another recession won’t occur. Dr. Fuller said another recession is inevitable, but when is the question.

A recession is defined as a period of an economic contraction, sometimes limited in scope or duration or as Wikipedia says it’s when the GDP falls or when we have negative growth. We have experienced this negative growth for the past 18 months and things are finally looking upward.  As is the housing market!

The real estate market in the Washington Metro area is hot and soon to get hotter! At Gateway our sales are up 4% over last year, but our volume is down by 5%, thus showing that prices have come down quite a bit from last year. Dr. Fuller predicted that builders will start building more spec homes about springtime of next year. He commented that we need to have 25,000 new homes (not resales) to accommodate just the new residents in the Northern Virginia area, compared to 1 million nationally. Currently in our Northern Virginia market, inventory is slowing decreasing. This week we see 5,984 active listings on the market…that’s down 56% from this time last year. Just goes to show it’s a great time to sell and with the $8,000 first time home buyer tax credit and low interest rates, it’s also a great time to buy.

Prince William Listing Exchange

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Jason Smith’s comments:

Inventory levels up slightly but everything else is staying steady so the market is going strong!  We are just under a 2 month supply of houses in

Prince William County.  The active inventory has 36% of the market as distressed sales.  Nationally, inventory levels are up 7.6% in July – here we are down – houses continue to sell which is great news for us.  There was a home with 20 contracts on it in Piedmont priced under $350,000.  It is still a very competitive environment for us in the first time buyer price range.  New construction activity is up as well and KB Homes is coming back to our area – stay tuned on where as we haven’t heard yet.

Loan modifications aren’t working with a majority of the lenders – anywhere.  The push to modify from the government hasn’t yielded results from what we’ve heard. 

There are very few FSBO’s on the market as well.  Auction activity only showed 3 houses on the “block” in October – other auctions previously featured 100’s of houses…the tide is changing – inventory is getting absorbed prior to auction.

Scott’s comments:

Career Night, September 24th: Bring an agent and get into a drawing for a designation and your guest agent gets thrown into a separate drawing for a designation at the end of the night. We’d love for you to invite those agents that would be a great fit for our company.

Business planning retreat…Pat Cunningham is one of our wonderful sponsors. Friday starts with golf, spa, cocktail party, and business planning starts on Saturday. It’s going to be a different format this year  with tons of interaction to help jump start your 2010!  The location is easy to get to and it’s a beautiful resort – the Hyatt in Cambridge  be sure to sign up today.

In today’s Market Watch, our monthly market update you will see that there is not much to talk about this month. For the first time in a long time, there is nothing earth shattering. It’s been relatively quiet.  There is nothing new that we need to be concerned about – yet.  There is a lot coming down the pike so stay tuned.  So what’s next?  Is the loan limit going to stay $729,750 or is going to be cut back to revert back to $629,650. Is the first time buyer tax credit going to be extended or will it go away?   When are rates going to go up and how high? When is the government going to dismiss the FED’s advice to continue to purchase mortgage backed securities.   If inventory levels go up by a thousand houses – BOA foreclosures in

Northern Virginia – it’s not going to affect the market too drastically.

Right now we are at May of 2005 inventory levels.  We need more homes to sell!

Pat Cunningham agrees that there is not much has been going on the mortgage front.   Rates are awesome – ARM’s are coming more into favor because of better education and lower start rates.

A year ago I remember the mid September of last year and we were literally in a financial firestorm and one of the things I was thinking then is about the fact that that Fannie & Freddie were going out of the business and lending institution having a hard time making loan and wondering if there will there be a credit freeze.

Let’s fast forward to today, its business as usual. We’ve gotten out of the toughest financial market of our time.  Interest rates are at historic lows.  PMI may require anti-flipping rules to be enforced and will be scrutinized heavily on 91-120 days be on the lookout for changes in this arena.

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Do you qualify to refinance your home? How do you know if you do?

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Do You Qualify for the Expanded Home Refinance Program?

The Home Affordable Refinance Program, or HARP, established by the Obama Administration, has been expanded, raising the maximum loan-to-value ratio from 105% to 125%. As a Member of the Top 5 in Real Estate Network®, many clients are asking me if they qualify for the HARP program. If you can answer “yes” to following questions, you may be eligible:

– Are you the owner of a one- to four-unit home?
– Do you have a loan owned or guaranteed by Fannie Mae or Freddie Mac?
– Are you current on your mortgage payments?
(“Current” means that you haven’t been more than 30-days late on your mortgage payment in the last 12 months.)
– Do you believe that the amount you owe on your first mortgage is about the same or less than the current value of your house?

Open to homeowners whose loans are owned or guaranteed by Fannie Mae or Freddie Mac, and covering first mortgages only, the HARP expansion means that an eligible homeowner with a $375,000 mortgage loan may now refinance if the house is worth at least $300,000.

The expansion is aimed at making refinancing available to more people whose homes are now worth less than the amount of their mortgages. As always, the borrower must meet income requirements and be able to afford the loan. Homeowners must also be current on their mortgage payments.

As a homeowner, you may be eligible if:

1. You obtained your mortgage before January 1, 2009
2. The home is owner occupied
3. The primary mortgage is less than $729,500

According to the Federal Housing Financing Agency, the higher loan-to-value refinancing will allow more homeowners to strengthen their finances by taking advantage of lower mortgage rates. HARP borrowers will be able to combine a lower mortgage rate with a faster amortization schedule, which will enable them to get “above water” on their mortgages more quickly.

The program also provides borrowers with an incentive to reduce the term of their loan from 30 years to a shorter-term, fixed-rate mortgage, enabling them to pay down the principal more quickly and reduce lifetime interest payments.

For more information on the HARP program, visit www.makinghomeaffordable.gov or e-mail me. If you know of others who can benefit from this information, please feel free to forward this email to them.

10 Ways to Protect Yourself from Mortgage Fraud

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As a leader in real estate, I am repeatedly asked specific questions about today's market – especially in today's economy. In an effort to provide more information to my community, I commited to providing current information that everyone may find useful. Here are the ways you can protect yourself from fraud….

Many of the challenges homeowners and home buyers are confronting today are the result of unscrupulous mortgages extended over the past several years. Help protect yourself during the home buying process with these tips from the American Homeowners Foundation and the American Homeowners Grassroots Alliance, www.AmericanHomeowners.org, or in Canada, with tips found at www.genworth.ca:

1. Deal only with reputable mortgage bankers or mortgage brokers. Get recommendations from neighbors and friends who dealt with them as customers. Check on the mortgagor’s record with the local Better Business Bureau and state licensing authority. As a Member of the Top 5 in Real Estate Network®, I can also provide you with many credible mortgage resources.

2. Ask how long they have been in the business, and be wary of working with someone with less than five years experience, no matter how reputable their employer may be.

3. Unlike professional real estate agents like myself, mortgagors owe you no fiduciary duty. While it is in the long-term interest of mortgage lenders and brokers to treat consumers fairly, for many, that doesn’t stand in the way of charging higher fees or interest rates. Always get quotes from at least three mortgage lenders and/or brokers, and make sure each one knows you are doing so.

4. Since you’ll be providing them the most comprehensive personal financial information you’ll ever provide any company, ask the lender to describe their data security policies, both online and offline.

5. To reduce the likelihood of overpaying for a home, make sure that you review recent selling prices for similar homes in the same neighborhood before you make an offer. I can provide you with a detailed analysis of the homes in our communities.

6. Set aside some extra money for closing costs. One of the vexations of real estate financing are the differences in estimated settlement costs on the Good Faith Estimate (GFE) forms, and the actual settlement costs, which very often include several hundred additional dollars worth of previously undisclosed and creatively named fees.

7. Pick the right kind of mortgage. Interest rates are higher on 30 year fixed rate loans than on 15 year fixed rate loans. Adjustable rate mortgages are always a gamble. You may well save money over the first few years if interest rates are dropping, but predicting their direction further out is very speculative. Prepayment penalties can more than offset any savings if the rates go up after that and you want to refinance.

8. Get pre-approved for your loan. Even though there is a glut of homes for sale in most areas right now, a mortgage loan pre-approval is essential to many sellers, and gives a big negotiating advantage to buyers in almost all cases.

9. It is important to review loan documents in advance and understand all the terms. Don’t be afraid to ask questions. Try to avoid loans with prepayment penalties if at all possible.

10. Save all the copies of all documents you receive and/or provide mortgage lenders or brokers.


Converstations on Shorts sales, HERA with Ed Dean with Potomac Mortgage Group

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The shorts sales continue to rear their ugly head. Our agents continue to have problems with the time spent working on them, the energy devoted to them and the lack of results they are getting out of them.  It appears now that many of the banks have gone to call centers handling the shorts sale calls for the banks and these people have no training no experience, but more importantly no authority to make decisions on whether or not to approve or disapprove a short sale. 

Enough of short sales, now onto the mortgage news…

This week the head of FHA, Dave Stevens, made the announcement that FHA will not be going the way of HVCC because he is a wise man and recognizes the inherent problem associated with the HVCC.  Great news for all of us in this regard!

In a recent conversation with Ed Dean, we were further educated on the new TIL reforms and told us that 10 days is a reasonable amount of time to get a loan to close, you would have to move heaven and earth to get a loan done in 7 days (it can be done, but it’s not recommended), but his belief is that it is not going to have as much of an impact as many people are indicating. Check out his notes on the subject from our conversation.  Ed did a review of 5,000 loans that his former mortgage company had done and noted that only 30 of those loans would have needed re-disclosure. A majority of those 30 needed re-disclosure as a result of people failing to lock in their interest rate or it was initially a pre-qualification and it went to contract several months later. You’ll note at the bottom of page 3 of his notes, how significantly the numbers need to change to get a re-disclosure.

Other mortgage news included guidelines continue to get tougher on condos with more restrictions imposed. In addition it has become virtually standard operating procedure for every lender to pull the Form 4506 from the IRS to request the borrower’s tax returns to make sure they match the ones they provided in the loan application process. Basically with the way the loans are going today, you have to fit inside the box. There is no thinking outside, underwriting or loans being approved outside the box. And lastly, second trusts continue to have no future or part of the mortgage or sales landscape.

As is always we strive to keep you educated in the real estate world.  Get it? Got it? Good!

Platinum Club….another great meeting!

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Another Platinum Club meeting, another short sale discussion meeting, when will the madness end?  My short answer is, when the government steps in and does something GOOD for our industry and gets banks to streamline and systemize the short sale process.

A few observations from today’s meeting include:  the processor makes all the difference in short sales, not the bank; as the foreclosures diminish, REO managers are migrating to Loss Mitigation departments – too early to tell if this will work better or not but us being optimists in this group, believe it will; despite what others say, make calls on your cases everyday – the squeaky wheel gets the grease.  The belief is that short sale departments are small – not big like everyone may think – in one case, one processor is handling 5 cases for one of the agents; everyone in the chain is overworked – negotiator, processor, and listing agent – much of the paperwork is lost in the process; the deals continue to get more difficult and take longer – one agent lost 6 deals in the last month; if the bank knows the property is vacant, it will speed up the foreclosure process;  the short sale part of the business has made agents more suspicious of each other – no MLS updates or incorrect/unauthorized status changes, unprofessional and/or unethical processes are instituted by many agents – they have clients ratify multiple contracts, and releasing contracts & accepting others without bank rejection of first contract is becoming more commonplace are just a few examples of what is taking place in our market;  only about 23% of short sales are making it to closing due to bank rejection, banks asking for notes from mortgagor, and the time it takes to get them to close today that buyers are releasing themselves from the contract.  From the listing side, to get better success, have buyers remove all contingencies prior to submitting the offer – it is easy to do in multiple contract situations and gets buyer buy in – provide title work, your own BPO, and mock HUD 1 with the offer, don’t wait on these procedures.

Additional discussions covered foreclosures.  There isn’t much happening on the foreclosure front.  The promise of the flood of foreclosures coming on the market is continuing to be delayed – bring it on is what we say as our inventory level is down 56% from the same time last year and the most competitive market is in the first time buyer price range where many of the supposed foreclosures will be priced.  We can sell’em if they list’em.  Listing assignments are down 75% from last year.  BPO’s are up – suspect they are for short sales – not for potential bank inventory.  Last year 1 BPO for every 5 listings obtained, this year it is the opposite, 1 listing for every 5 BPO’s.

Many markets are still extremely price sensitive – even when they are priced just a little high.  When priced right, in the right condition and show well – they sell.  Get it?  Got it?  Good!

Now, go sell something!