Subprime Mortgage Delinquencies Fall for First Time in 44 Months... Still High Though

The FED's MBS Purchase Program Nearing End Of Funds Allocation

Fed MBS Program Update: 94% of Funding Used

Big Changes To FHA

NEW YORK (CNNMoney.com) -- It's going to be harder to get a government-backed mortgage from now on.

Looking to shore up its weakening finances, the Federal Housing Administration is set to announce stricter standards on Wednesday.

The agency, which insured nearly a third of new mortgages in 2009, will increase the premium it charges for its mortgage insurance and require those with weaker credit scores to come up with larger downpayments.

The FHA will also reduce the amount of money a seller can provide a homebuyer for closing costs, as well as tighten its enforcement of lenders.

"Striking the right balance between managing the FHA's risk, continuing to provide access to underserved communities, and supporting the nation's economic recovery is critically important," FHA Commissioner David Stevens said in a statement. "Importantly, FHA will remain the largest source of home purchase financing for underserved communities."

FHA loans have skyrocketed in popularity during the mortgage crisis since the agency backstops banks if borrowers stop paying. But housing experts are growing increasingly concerned about the agency's ability to handle rising numbers of defaults. (Cash cushion shrivels for FHA.)

In November, the agency reported that its reserve fund has dropped to .53% of its insurance guarantees, well below the 2% ratio mandated by Congress and the 3% ratio it had last fall. The fund covers losses on the mortgages the agency insures.

Federal housing officials, who took several steps to shore up the agency's finances last year, promised to do more. The new announcement is the latest set of changes to FHA policies.
What the new rules mean

The agency will increase its up-front mortgage insurance premium to 2.25%, from 1.75%. It will also ask Congress for the right to hike its ongoing premium, currently between .5% and .55% monthly.

The FHA will also require borrowers to have at least a credit score of 580 to qualify for the agency's 3.5% downpayment program. Those with lower scores will have to pay at least 10%. However, this rule may have little practical effect since Stevens recently said the average borrower score is 693.

The new policy also will reduce the amount of money sellers can provide to homebuyers at closing to 3%, down from 6%, of the home's price. That change will bring the agency in line with industry standards and remove the incentive to inflate appraisals.

Finally, officials plan to clamp down on lenders offering FHA mortgages. It will more closely monitor their performance and compliance with agency rules, as well as seek legislative authority to require mortgage firms to assume liability for all loans they originate and underwrite.

One thing the agency did not do is to broadly increase the downpayment requirement. Many industry observers said such a step is necessary to reduce the risk the FHA faces.
Agency plays crucial role

As banks have clamped down on mortgage lending, the FHA program has emerged as one of the few ways people can buy a home.

Banks are more willing to make FHA loans because they come with a federal guarantee to cover losses if the borrower defaults. And borrowers can more easily qualify for FHA loans because they only need 3.5% down and can have lower credit scores.

As a result, demand for FHA loans has exploded. The agency guaranteed more than $360 billion in single-family mortgages in fiscal 2009, which ended Sept. 30, more than four times the volume in 2007.

The agency insured about 30% of home purchases and 20% of refinanced mortgages in 2009. Nearly 50% of first-time homebuyers go through the agency.

The agency, however, has also seen a spike in delinquencies amid the mortgage meltdown. Some 14.36% of FHA loans were past due in the third quarter, according to the Mortgage Bankers Association. This compares to 9.64% of all loans

House Prices Still Up 25% Over Last Decade - Amazing!

Top Metro Areas by Mortgage Lending Volume, 2008

Top Metropolitan Areas by Lending Volume

All Metropolitan Areas

New HUD/FHA Condo Guidelines

December 7 has been set as the date for the new condo review and approval requirements. For cases pulled on and after December 7 the condo project must either be currently approved on the approved condo list at https://entp.hud.gov/idapp/html/condlook.cfm or must be reviewed and approved before the case can close with FHA financing.

HUD offers two approval options: DELRAP and HRAP.

DELRAP stands for Direct Endorsement Lender Review Approval Process and HRAP stands for HUD Review Approval Process.  HUD agreed to allow experienced lenders the option of taking on responsibility for reviewing and approving some projects while choosing to submit others directly to HUD for their expertise on others.

1. The project must include no less than two units

2. All projects must be covered by hazard and liability insurance and applicable projects must provide evidence of coverage for flood insurance and fidelity bond insurance when required.

3. For projects whose master insurance policy does not include interior unit coverage, evidence of the borrower’s HO6 coverage must be obtained and provided.

4. Right of first refusal is now deemed acceptable as long as it does not subject any person to discrimination as listed or defined under the Fair Housing Act regulation 24 CFR part 100.

5. No greater than 25% of the total project’s floor space may be used for commercial purposes.

6. No more than 10% of the units can be owned by a single individual or investor.

7. No more than 15% of the unit owners are allowed to be delinquent on their HOA fees.

8. Evidence of a minimum 50% pre-sale must be presented in the form of any of the following: 

A direct builder certification requires the builder to sign and certify as to the following:

The undersigned hereby certifies that in lieu of providing (1) Copies of sales agreements and evidence that a mortgagee has issued approval; or (2) Evidence that units have closed and are occupied; the Developer/Builder has attached to the signed and dated certification, a list documenting all units sold, under contract or closed (i.e., and excel spreadsheet). This information will be used to document the required minimum presale requirement of 50 percent.

Title 18 U.S.C. 1014, provides in part that whoever knowingly and willfully makes or uses a document containing any false, fictitious, or fraudulent statement or entry, in any matter in the jurisdiction of any department or agency of the United States, shall be fined not more than $1,000,000 or imprisoned for not more than 30 years or both. In addition, violation of this or others may result in debarment and civil liability for damages suffered by the Department.

9. At least 50% of the units must be occupied by owners or sold to owners who intend to occupy.

10. Projects consisting of three or fewer units must not have more than one unit encumbered by FHA financing.

Projects consisting of four or more units must not have greater than 30% of the total number of units encumbered by FHA.

HUD will be tracking the number of cases assigned in each project and the FHA concentration will be listed within the condo approval data screens at https://entp.hud.gov/idapp/html/condlook.cfm.

11. The homeowners association budget must be reviewed for adequacy to ensure sufficient funds are available to maintain and preserve all amenities and features unique to the condominium project.

Government Moratorum Expiration Forces Jump In Illinois Foreclosures

Awaiting FHA's Audit Results

FHA Audit Due Wednesday Morning

11/04/2009 morning the Federal Housing Administration (FHA) will release their mortgage insider anticipated audit of its finances.

The details about how much capital is left in its single family insurance reserve fund which covers losses on its massive amount of covered homes is being awaited. FHA commissioner David Stevens has stated that the government entity and single family home loan insurer won't need tax payor money to weather the recession and housing crisis.

FHA's David Stevens told National Mortgage News last month that the stories of a mismanaged fund are essentially groundless. A spokesman for the agency said it does not anticipate releasing any results that will vary widely from "what we've already signaled."

Recently FHA has tightened its underwriting guidelines and taken administrative action against certain lenders that it believes were abusing and violating its guidelines.

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Appropriations Committee Keeping 2009 Home Loan Limits

Appropriations Committee Agrees to Extend Current Loan Limits 

Great news for would be home buyers !

October 28, 2009 Origination News

House and Senate appropriators have agreed to extend the current loan limits for Fannie Mae, Freddie Mac and Federal Housing Administration loans for another year as part of the continuing funding resolution Congress is expected to pass this week.

"The CR [continuing resolution] maintains the limits for FHA, GSE ... single-family mortgages at $729,750 through the end of calendar year 2010," according to a statement issued by the chairmen of the appropriations committees. The maximum $729,750 loan limit is due to expire Dec. 31 and it would drop down to $625,500 if it were not extended.

"This could result in major disruptions in the mortgage origination market for larger loan sizes as early as November," the appropriations chairmen said. Earlier in the week, industry trade groups warned Congress that quick action is needed because it is becoming more difficult for lenders to approve mortgages with balances above $625,500 due to uncertainty about an extension.

Realestateloans.com

HVCC Dying Soon

An amendment would sunset the scrutinized Home Valuation Code of Conduct (HVCC) obtained unanimous support from the House Financial Services Committee last week. The legislation was created by Rep. Gary Miller (R-CA), along with many calls on regulators to work together for more reasonable appraisal standards, while simultaneously elminating HVCC.

Loan originators would be able to order their own appraisals again instead of being abused by Appraisal Management Companies (AMCs). "I supportive of ensuring accurate appraisals, I have repeatedly expressed concern that the HVCC has potential to increase costs to consumers, significantly hinder a consumer’s ability to obtain legitimate and reliable appraisals, and adversely impact small business professionals who work in the very neighborhoods where these consumers are looking to purchase homes. In fact, since the implementation of the HVCC on May 1, there are numerous examples of higher costs for appraisals, poor service, the inability to use one appraisal for more than one lender, questionable quality of appraisals, and the inability to make corrections to inaccurate information on an appraisal report.” Congressman Miller stated.

Since the HVCC was implemented in May of 2009, appraisers have argued that it has cut salaries in half while destroying their hard earned relationships. Homeowners also complained in droves that appraisals are valued low, causing problems for those looking to refinance or sell their properties.

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Home Buyer Tax Credit Needs Boost. Stop Dabbling and Knock This Downturn Out !

Home Buyer Tax Credit Needs Boost to Stimulate

October 9, 2009

Simply extending the $8,000 first-time homebuyer tax credit will not provide much stimulus for the economy, according an IHS Global Insight economist. "The first time buyers who were going to use it would have used it already," said Global Insight economist Patrick Newport. Congress has to "expand it in some way to have any impact," he said. The Obama administration and congressional Democrats are discussing ways to create more jobs and stimulate the economy and a homebuyer tax credit extension is in the mix. The first-time homebuyer tax credit is due to expire November 30 and the National Association of Home Builders and others are pushing for an extension that expands the tax credit to all home buyers. NAHB president and CEO Jerry Howard says it would kick start the move-up market, generate more sales and construction, and create 350,000 jobs. But it would cost the government $30 billion to $35 billion for a full year. "To get the most bang for the buck, it is has to be in effect throughout the spring and summer home buying season," Mr. Howard said.

$15,000 Tax Credit Must Be Applied To All Homebuyers

A poll recently released by real estate information company Zillow indicates that 1 in 5 prospective first-time buyers said extending the $8,000 credit through 2010 would be the “primary influence on their decision to buy.”

Another 1 in 4 of respondents said a possible extension would have a “significant influence” on their home buying decision. Zillow did the numbers and thinks an extension from December 30, 2009 to November 30, 2010 would result in an additional 334,000 home buyers.

Zillow economists cautioned that the homebuyer tax credit may not be the most efficient means of boosting flagging home sales.

“There’s little doubt that the tax credit will boost demand at the margin, and that fact will make it easier to work down our current high inventory levels of existing homes on the market, said Zillow Chief Economist Stan Humphries.That said, the cost of bringing these additional homebuyers into the market is substantial. Assuming 1.86 million first-time buyers take advantage of the full credit once extended, this translates into an additional $14.86 billion in government spending. For every five homebuyers who receive the credit, four would have bought their home even without the credit.”

The first-time homebuyer tax credit is due to expire on November 30, 2009

Freddie Mac Say's Home Prices Stablizing, Even Going Up...

A report today released by mortgage financer Freddie Mac said home prices increased in every region throughout the United States the first time that has happened in several years. Freddie’s Conventional Mortgage Home Price Index (CMHPI) Home Purchase information data reported a 1.7% quarterly gain, following a downward revised 1.5 percent drop in the first quarter.

Freddie also claims that “appraisals are backwards looking through the use of recent comparable property transactions,” so they typically lag changes in the purchase-only series.

California Housing Sales Coming Out of Slowdown

Prices for Californias home increased for the third straight month in July according to DataQuick. Last month, the average price increased to $250,000, up close to 2% from $246,000 in June yet still 21.4% below the $318,000 average last year.

Of the exiting homes sold last month  43.7% were previously foreclosed on in the past year, the lowest percentage to date this year. A year ago, the share of previously foreclosed was 42.5% with such sales peaking at 58.8% in February of this year.

Both new and resale home sales, which totaled 45,079, increased 2.1% from June, and were up 14.1% compared to July 2008. Sales have now increased on a year over year for the past 13 months. Last month’s sales were the highest for any month since August of 2006. In the Bay Area homes sales hit a four year high last month as transactions above the $500,000 mark increased and low cost foreclosures dried up.

We're over the worst!

Existing Home Sales Show Strong Gains

DATA FROM WASHINGTON, D.C. SHOWS-  Existing-home sales rose unexpectedly while inventory declined, led by a surge of sales in the West, according to the National Association of Realtors^®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – jumped 6.5 percent to a seasonally adjusted annual rate of 4.74 million units in December from a downwardly revised pace of 4.45 million units in November, but are 3.5 percent below the 4.91 million-unit pace in December 2007.

For all of 2008 there were 4,912,000 existing-home sales, which was 13.1 percent below the 5,652,000 transactions recorded in 2007. This is the lowest volume since 1997 when there were 4,371,000 sales.

Lawrence Yun, NAR chief economist, said home prices continue to fall significantly. “It appears some buyers are taking advantage of much lower home prices,” he said. “The higher monthly sales gain and falling inventory are steps in the right direction, but the market is still far from normal balanced conditions. Buyers will continue to have an edge over sellers for the foreseeable future.”

Total housing inventory at the end of December fell 11.7 percent to 3.68 million existing homes available for sale, which represents a 9.3-month supply at the current sales pace, down from a 11.2-month supply in November.

Yun said the market is underperforming and hurting the broader economy. “We’ve added 25 million people to our population over the past decade and housing affordability conditions are the best we’ve seen since 1973, but household formation is much lower than expected,” he said. “Consequently, there is a pent-up demand which could be unleashed with the right stimulus, including a non-repayable home buyer tax credit. The Obama administration and Congress need to move fast to stimulate a spring sales upturn which will help to stabilize home prices and set the foundation for a sustainable economic recovery.”

The national median existing-home price for all housing types was $175,400 in December, which is 15.3 percent below December 2007 when the median was $207,000. There remains a significant downward distortion in the current median from a large number of distress sales at discounted prices, currently 45 percent of transactions; the median is where half of the homes sold for more and half sold for less. For all of 2008, the median price was $198,600, down 9.3 percent from $219,000 in 2007.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said it’s an excellent time for first-time home buyers with good jobs. “The typical buyer plans to stay in their home for 10 years, which is the correct approach in today’s market,” he said. “With historically low mortgage interest rates, flexible sellers, a large inventory, and homes that are selling for less than replacement construction costs in much of the country, buyers who’ve been on the fence should take a closer look at today’s market.”

McMillan added that first-time buyers may want to consider an FHA loan, which offers downpayments of 3.5 percent on a safe 30-year fixed-rate mortgage.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 5.29 percent in December from 6.09 percent in November; the rate was 6.10 percent in December 2007. Last week, Freddie Mac reported the 30-year rate was 5.12 percent.

Single-family home sales rose 7.0 percent to a seasonally adjusted annual rate of 4.26 million in December from a level of 3.98 million in November, but are 1.4 percent below a 4.32 million-unit pace in December 2007. For all of 2008, single-family sales fell 11.9 percent to 4,349,000.

The median existing single-family home price was $174,700 in December, down 14.8 percent from a year ago. For all of 2008, the single-family median was $197,100, which is 9.5 percent below 2007.

Existing condominium and co-op sales increased 2.1 percent to a seasonally adjusted annual rate of 480,000 units in December from 470,000 in November, but are 18.4 percent below the 588,000-unit level a year ago. For all of 2008, condo sales dropped 21.0 percent to 563,000 units.

The median existing condo price was $181,400 in December, down 18.3 percent from December 2007. For all of 2008, the median condo price was $210,000, which is 7.2 percent below 2007.

Regionally, existing-home sales in the Northeast slipped 1.4 percent to an annual pace of 720,000 in December, and are 14.3 percent below December 2007. The median price in the Northeast was $235,000, which is 7.8 percent lower than a year ago.

Existing-home sales in the Midwest increased 4.0 percent in December to a level of 1.04 million but are 10.3 percent below a year ago. The median price in the Midwest was $140,800, down 11.4 percent from December 2007.

In the South, existing-home sales rose 7.4 percent to an annual pace of 1.74 million in December, but are 11.2 percent lower than December 2007. The median price in the South was $158,600, which is down 8.0 percent from a year ago.

Existing-home sales in the West jumped 13.6 percent to an annual rate of 1.25 million in December and are 31.6 percent higher than a year ago. The median price in the West was $213,100, down 31.5 percent from December 2007.

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