Life after the government support for real estate

Well, all the hype over the government’s propping up of the real estate market is over and where do we stand?  It may be too early to tell as it has only been one week but in speaking with lenders, title companies, home inspectors and  – oh yeah – Realtors too, the market continues to hum along.  Contracts are being written and accepted.  What appears to remain hot are the lower price ranges (those below $400,000) and the upper price ranges ($800,000-$1,000,000 in some areas) so it appears to be business as usual – so far – for these sellers. 

The sellers we are concerned about are the ones priced between $400,000 and $800,000 as it seems in many areas these housing prices haven’t found their bottom of the market yet.  Going forward it will be critically important to pay particular attention to this segment of the market as we are starting to see the beginning stages of the foreclosures being released into the market.   More BPO’s (Broker Price Opinions) are being requested, Bank of America has hired a third party vendor to help with their release of foreclosures and Notice of Trustee sales are flooding the papers.  And from what we notice, they are going to fall into the $400,000-$800,000 price ranges – not the lower end as we saw in 2008.  From all indications, we are looking at an alarming number of foreclosures hitting our market prior to the third quarter of this year – not as many as we saw in 2008 but close to those levels.  This will have a definite impact on prices.

As far as rates are concerned, mortgage interest rates hit a 6 week low this week suggesting that private investors have filled in for the government in their purchasing of mortgage backed securities.  In addition, there have been several reports stating that the government will continue to keep the Federal Funds rate at or near 0-.25% which should continue to encourage investors to buy these securities and keep rates low for home owners through the end of the year which is good news for housing.

How will the end of the home buyer tax credit impact the market?  In a recent survey of first time buyers conducted by SunTrust, they found that only 10% of these buyers purchased their homes because of the home buyer tax credit.  Low interest rates, affordable house prices, desire to own versus rent were the main reasons why decided to purchase over any other.  A good deal is a good deal.  If the market shows signs of slowing, let’s keep an eye on seller and builder incentives to lure buyers into their properties – right now, we don’t see any but only time will tell.  For now, we don’t believe our market will be severely impacted by this incentive ending.

Another bright spot in our market that will help us continue to sell houses is the “new and improved” short sale process through HAMP to HAFA.  These programs will help qualified sellers have the ability to get approval on short sales much more quickly than in previous years.  This streamlined process will not only help sellers avoid foreclosure but also help buyers get into homes and protect neighborhood values.  We are anticipating this to be a tremendous asset in selling houses going forward.

All things being considered, now is a great time to be a buyer or seller in the Northern Virginia Market.  It is important to stay on top of the trends that affect real estate, watch inventory levels and the type of inventory coming on the market, and lastly, track the number of buyers in the market place to help buyers and sellers make the right decisions when considering real estate.  Get it?  Got it?  Good!

What’s on the horizon?

Inventory levels on active listings are creeping up and they have been consistently increasing since the beginning of the year.  We have seen an escalation in the number of houses going on the market each week, week over week except one.  This is definitely something to watch especially as mortgage rates begin to rise.  We have seen a slight increase in interest rates – they have only increased 1/4% since last week this time but they are rising.  The good news is it isn’t as drastic as many predicted as the Fed eased out of buying mortgage backed securities but it is probably keen advice to give to your clients to lock in today and not play the waiting game here!  The saying is “rates take the escalator down but the elevator up”, don’t wait.

Another key factor to watch as inventory rises is the pricing of your properties…how is the activity at your listing?  Are you experiencing lots of buyers going through and have you had no contracts?  Have you had little to no traffic going through the house?  If so, the price may be high.  Check comps again, look at inventory levels in competing price points and the surrounding area.  How has the absorption rate been in and around your listing?  Do the research and price it properly today so you aren’t chasing the market tomorrow!  Many sellers hear the market has rebounded price wise in our area because of the recent article in the Washington Examiner and the brisk pace of sales recently but remember to caution them that the market is local and in many cases hyper local so be careful on pricing it a little high for negotiations.  Be the professional and let the numbers tell the story of the market.

So, what is on the horizon?

On Monday, upfront mortgage insurance on FHA loans goes from 1.75 to 2.25% – revise your buyer closing cost sheets as this will have an impact on their payments.  Seller contributions are reduced from 6% to 3% and down payments on FICO scores 580 and below are increased to 10%.

The short sale process – in some cases may get better after April 5th.  Home Affordable Foreclosure Alternatives program affects home sellers with Freddie Mac and Fannie Mae backed mortgages.  Not all properties qualify so check the websites of these GSE’s and see if the seller’s loan is with either one before proceeding or check to see who the loan servicer is on the property. 

Here are the guidelines accompanying the program: 

  • This program complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home. HAFA alternatives are available to all HAMP-eligible borrowers who:   1) do not qualify for a Trial Period Plan;  2) do not successfully complete a Trial Period Plan;  3) miss at least two consecutive payment during a HAMP modification; or, 4) request a short sale or deed-in-lieu.
  • Property is principal residence.
  • Mortgage originated before Jan. 1, 2009.
  • Borrower is delinquent or default is foreseeable.
  • Borrower's total monthly housing payment exceeds 31 percent of gross income.
  • Unpaid principal does not exceed $729,750.
  • Homeowner demonstrates hardship. 
  • The program utilizes the borrower’s financial and hardship information already collected in connection with consideration of a loan modification.  The borrower must have applied for and been denied a loan modification prior to entry into this program.   Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
  • Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).
  • Uses standard processes, documents, and timeframes/deadlines.  These deadlines include:  the borrower has 14 days from acceptance of services to return the Short Sale Agreement to their servicer in which they are granted 120 days to sell the house.  Once an offer is received, the agent must provide a RASS (Request for Approval of Short Sale) within 3 business days of receiving offer along with new buyer preapproval and all lien information to the servicer.  The servicer has 10 business days to accept the offer along with provisions to settle or deny the offer and they must provide an explanation of the denial.  Settlement must occur within 45 days.  The new buyers cannot “flip” or sell the property for 90 days and it must be an “arms length” transaction.
  • Provides the following financial incentives:
    • $3,000 for borrower relocation assistance;
    • $1,500 for servicers to cover administrative and processing costs;
    • Up to $2,000 for investors who allow a total of up to $6,000 in short sale proceeds to be distributed to subordinate lien holders, on a one-for-three matching basis.
    • Realtors cannot charge or receive commissions in excess of 6% and if the buyer or seller is a Realtor, they cannot receive a commission in connection with the transaction – including any side deals.
  • Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.

There is opportunity here people…know the program and know the process and you can sell more houses!  On Monday, April 5th at 7:00pm Margret Kelly will be hosting a program with BOA on Equator and how the program works.  Watch it on RE/MAX University.

Also, in an effort to assist with the HAFA and HAMP programs, many banks have agreed to participate in the 2MP program.  The 2MP was designed to work in tandem with the Home Affordable Modification Program and is aimed at helping homeowners who have a second home equity mortgage.   The Treasury estimates, up to 50 percent of at-risk mortgages also have second liens associated with them.

To qualify for the program, homeowners must successfully complete a trial modification on their first mortgage. Then, if the servicer of the borrower’s second line in a 2MP participant, the servicer must offer to modify the second lien or accept a lump sum payment from Treasury in exchange for fully doing away with the second lien.

Her are the guidelines in which the 2MP program is designed to work:

  • Only second liens with corresponding first liens that have been modified under HAMP are eligible for a modification or extinguishment under 2MP.
  • Second lines originated on or before January 1, 2009 are eligible for a modification or extinguishment under 2MP.
  • A second lien may be modified only once under 2MP
  • A mortgage loan that is subordinate to a second lien (i.e.: third, fourth position loans, etc) is ineligible under 2MP. However, modification or extinguishment of such a subordinate mortgage lien in place of the second lien will not satisfy the servicer’s obligation under 2MP to modify or extinguish the second lien.
  • If a second lien is modified under 2MP, it is not eligible for payment of extinguishment incentives under 2MP
  • A mortgage lien that would be in second lien position but for a tax lien, a mechanic’s lien or other non-mortgage related lien that has priority is eligible under 2MP
  • A second lien on which no interest is charged and no payments are due until the first lien is paid in full (e.g., FHA partial claims liens and/or equity appreciation loans) is not eligible under 2MP
  • Borrowers may be accepted into the program if a fully executed 2MP modification agreement or trial period plan is in the servicer’s possession on December 31, 2012.

All servicers of eligible second liens may participate in 2MP. A servicer need not service the related first lien or participate in HAMP in order to participate in 2MP.


Here are some helpful links:

Interest rates

Interest rates are expected to go up but luckily it is not at the pace or severity that many had speculated.  The funds rate are set to stay at the 0 to .25% level to help keep mortgage interest rates low.  Once again, we are relying on Wall Street to step up and help create the secondary market to buy mortgage backed securities and keep rates affordable to consumers.  Let’s hope this short trend continues!

In our conversation with Paul Muolo at the quarterly meeting last week, he mentioned that there had only been one big purchase of bulk loans, well….there has been another large purchase this week.  To learn about the details, which is unbelievable to me, check out the article at

More good news

First American Core Logic has estimates that the Washington Region will be floating – out from being underwater by2015!  This is ahead of 10 other key markets.   There study was based upon an annual 3.3% reduction in loan balances coupled with 3% appreciation over the next decade.  They had estimated that 11.3 million or 24% of homes with mortgages were under water in Q4 of 2009.

As discussed before, today, more than ever, it is extremely important to stay educated on the market, what is coming down the road and know how to make the appropriate adjustments to thrive in any market.  You gotta learn more to earn more.  Get it?  Got it?  Good!

Now, go sell something!