Fannie, Freddie to buy bigger loans
Move means lower rates on many mortgages up to $729,750
Fannie Mae and Freddie Mac are once again set to begin buying "super-conforming" mortgage loans of up to $729,750, which should bring rates down for borrowers with good credit seeking loans previously classified as jumbo.
Currently, loans greater than the $417,000 conforming limit in "normal" housing markets -- or the super-conforming limit of up to $625,500 in high-cost markets -- are considered jumbo loans.
Jumbo loans carry higher rates than conforming loans because they aren't eligible for purchase or guarantee by Fannie Mae and Freddie Mac. Rates on jumbo loans are running at least 1 percent to 1.5 percent higher than conforming loans of less than $417,000.
In between conforming and jumbo loans are so-called super-conforming loans that exceed the $417,000 conforming loan limit, but are still eligible for purchase or guarantee by Fannie and Freddie.
Super-conforming loans carry slightly higher interest rates than conforming loans -- about 25 to 30 basis points -- but are less costly than jumbo loans that Fannie and Freddie can't buy or guarantee. A basis point is one hundredth of a percent.
On Jan. 1, the upper limit for super-conforming loans was rolled back from $729,750 to $625,500. But the economic stimulus bill signed into law Feb. 17 restored the higher limit for single-family homes in high-cost markets that was in place for much of 2008.
The following week, the Federal Housing Finance Agency published lookup tables for the new Fannie and Freddie limits in high-cost markets -- 250 counties nationwide.
But Fannie Mae did not issue its eligibility requirements for the new limits until March 30. Freddie Mac published its guidelines on April 16. Both companies will begin buying super conforming loans of up to $729,750 from lenders on May 4.
Wells Fargo will begin making super-conforming loans of up to $729,750 in high-cost markets on Monday, and Bank of America will start in mid-May, the San Francisco Chronicle reported.
Implementation of the new policy should mean lower rates for some borrowers seeking loans that were previously classified as jumbo, but which now qualify for purchase by Fannie and Freddie as super-conforming loans.
Borrowers will generally need FICO scores of at least 700 to obtain fixed-rate super-conforming mortgages, and provide at least a 10 percent down payment. Freddie Mac will require down payments of at least 20 percent for loans above $625,500.
Both Fannie and Freddie are requiring appraisal reviews in cases where borrowers are putting down less than 20 percent on loans larger than $625,000, or less than 25 percent down on loans where the property is valued at more than $1 million (super-conforming loans of up to $1.4 million are available for multi-unit properites).
The secondary market for loans not backed by Fannie and Freddie all but dried up in September 2007. Lenders have been charging more for jumbo loans ever since, because they must hold them on their books.
To address the problem, Congress last year temporarily raised the $417,000 conforming loan limit, but only in high-cost housing areas. The new rules allowed Fannie and Freddie to buy or guarantee loans of up to 125 percent of the median home price in high-cost areas, with an upper limit of $729,750.
There were hopes that the secondary market for jumbo loans would be restored by now. On Jan. 1, a sunset provision in last year's stimulus bill brought the super-conforming loan limit back down to 115 percent of median home price in high-cost markets, with a cap of $625,500.
But the secondary market for jumbo loans hasn't come back. So this year's stimulus bill, H.R. 1, the American Recovery and Reinvestment Act, restored the super-conforming loan limits in place for high-cost housing markets during much of 2008.
The bill also restored the Federal Housing Administration's ability to guarantee loans of up to 125 percent of the median home price in high-cost markets, up to a maximum of $729,750 for one-unit properties, $934,200 for two-unit properties, $1,129,250 for three-unit properties, and $1,403,400 for four-unit properties.
The floor limit for FHA loans in normal markets remains $271,050 for one-unit properties, $347,000 for two-unit properties, $419,400 for three-unit properties, and $521,250 for four-unit properties.
There are 73 counties at the $729,750 FHA ceiling, and 666 counties where loan limits are between the $271,050 floor and the $729,750 ceiling for one-unit properties.
Inman News, April 24, 2009.
Friday, April 24, 2009
Friday, April 17, 2009
Some banks restoring credit following a short sale
REO Guru learned Wells Fargo is sending letters to borrowers with short sales in process notifying them their credit will be saved. They state they will send a letter to all three credit bureaus following the successful short sale and the borrower's credit will be "restored within 90 days." This is a decent move by a strong bank. Hopefully more will follow suit.
Wednesday, April 15, 2009
Banks aren't reselling many foreclosed homes (aka "shadow inventory")
A vast "shadow inventory" of foreclosed homes that banks are holding off the market could wreak havoc with the already battered real estate sector, industry observers say.
Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.
"We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market," said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. "California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You'd have further depreciation and carnage."
In a recent study, RealtyTrac compared its database of bank-repossessed homes to MLS listings of for-sale homes in four states. It found a significant disparity - only 30 percent of the foreclosures were listed for sale in the Multiple Listing Service. The remainder is known in the industry as "shadow inventory."
"There is a real danger that there is much more (foreclosure) inventory than we are measuring," said Celia Chen, director of housing economics at Moody's Economy.com in Pennsylvania. "Eventually those homes will have to be dealt with. If they're all put on the market, that will add more inventory to an already bloated market and drive down home prices even more."
More than one-third locally
In the Bay Area, a Chronicle analysis of data from San Diego's MDA DataQuick shows that more than one-third of foreclosures are in shadow territory - that is, they are not registering in county records as having been resold.
For the 26 months from January 2007 through February 2009, banks repossessed 51,602 homes and condos in the nine-county Bay Area, according to DataQuick. Yet in the same period, only 30,823 foreclosures were resold, leaving about 20,000 bank repos unaccounted for.
Turnaround usually quick
Realtors say foreclosures generally go on the market a month or two after the bank takes title and then sell fairly quickly, often getting an accepted offer within a week or two of being listed and then closing escrow within 30 days. That means that foreclosures should register as being resold within three months.
But taking the foreclosures in any given month or selection of months and looking at what happened three months later also reveals a big gap between what banks took back and what they resold.
Tom Kelly, a spokesman for banking giant Chase in Chicago, said the bank sells foreclosed homes in a timely fashion. "We try not to be in the business of owning homes," he said. "Our goal is to get them back on the market as quickly as possible. We want to maximize what we sell them for and yet do it quickly."
Kelly was at a loss to explain the shadow inventory phenomenon other than the quantities involved. "The inventory might be growing because there is just a lot of volume coming in. That would not surprise me," he said.
Most observers say the recent fall-off in foreclosures came because the State and many banks implemented foreclosure moratoriums in the fall, not because the problem has diminished.
Only 65.5 percent resold.
"Foreclosure numbers are artificially depressed," said CEO Sean O'Toole.
So why aren't banks selling off their foreclosures?
Observers say several factors are at work.
-- The "pig in the python": Digesting all those foreclosures takes awhile. It's time-consuming to get a home vacant, clean and ready for sale. "The system is overwhelmed by the volume," Sharga said. "In a normal market, there are 160,000 (foreclosures for sale nationwide) over the course of a year. Right now, there are about 80,000 every month."
-- Accounting sleight-of-hand: Lenders could be deferring sales to put off having to acknowledge the actual extent of their loss. "With banks in the stress they're in, I don't think they're anxious to show losses in assets on their balance sheets," O'Toole said.
-- Slowing the free-fall: Banks might be strategically holding back some foreclosures so prices don't fall as fast. "They want to be careful about not releasing them too quickly so they don't drive prices down and hurt the values," O'Toole said.
Besides the shadow foreclosures, yet another wave of distressed properties is in the pipeline. These are homes with delinquent payments for which the banks appear to be prolonging the foreclosure process. Some of that could be because they're negotiating with homeowners about loan modifications or other ways to keep them in the home. But banks also could be deliberately foot-dragging for the same three reasons listed above.
"The problem is that no one knows how extensive (the shadow inventory) is," said Patrick Newport, U.S. economist with the Massachusetts research firm Global Insight. "It's a wild card. If it's a really big number, you'll see prices drop a lot more and deeper problems for the financial system."
From the San Francisco Chronicle - Carolyn Said, Staff Writer
Wednesday, April 8, 2009
Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.
"We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market," said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. "California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You'd have further depreciation and carnage."
In a recent study, RealtyTrac compared its database of bank-repossessed homes to MLS listings of for-sale homes in four states. It found a significant disparity - only 30 percent of the foreclosures were listed for sale in the Multiple Listing Service. The remainder is known in the industry as "shadow inventory."
"There is a real danger that there is much more (foreclosure) inventory than we are measuring," said Celia Chen, director of housing economics at Moody's Economy.com in Pennsylvania. "Eventually those homes will have to be dealt with. If they're all put on the market, that will add more inventory to an already bloated market and drive down home prices even more."
More than one-third locally
In the Bay Area, a Chronicle analysis of data from San Diego's MDA DataQuick shows that more than one-third of foreclosures are in shadow territory - that is, they are not registering in county records as having been resold.
For the 26 months from January 2007 through February 2009, banks repossessed 51,602 homes and condos in the nine-county Bay Area, according to DataQuick. Yet in the same period, only 30,823 foreclosures were resold, leaving about 20,000 bank repos unaccounted for.
Turnaround usually quick
Realtors say foreclosures generally go on the market a month or two after the bank takes title and then sell fairly quickly, often getting an accepted offer within a week or two of being listed and then closing escrow within 30 days. That means that foreclosures should register as being resold within three months.
But taking the foreclosures in any given month or selection of months and looking at what happened three months later also reveals a big gap between what banks took back and what they resold.
Tom Kelly, a spokesman for banking giant Chase in Chicago, said the bank sells foreclosed homes in a timely fashion. "We try not to be in the business of owning homes," he said. "Our goal is to get them back on the market as quickly as possible. We want to maximize what we sell them for and yet do it quickly."
Kelly was at a loss to explain the shadow inventory phenomenon other than the quantities involved. "The inventory might be growing because there is just a lot of volume coming in. That would not surprise me," he said.
Most observers say the recent fall-off in foreclosures came because the State and many banks implemented foreclosure moratoriums in the fall, not because the problem has diminished.
Only 65.5 percent resold.
"Foreclosure numbers are artificially depressed," said CEO Sean O'Toole.
So why aren't banks selling off their foreclosures?
Observers say several factors are at work.
-- The "pig in the python": Digesting all those foreclosures takes awhile. It's time-consuming to get a home vacant, clean and ready for sale. "The system is overwhelmed by the volume," Sharga said. "In a normal market, there are 160,000 (foreclosures for sale nationwide) over the course of a year. Right now, there are about 80,000 every month."
-- Accounting sleight-of-hand: Lenders could be deferring sales to put off having to acknowledge the actual extent of their loss. "With banks in the stress they're in, I don't think they're anxious to show losses in assets on their balance sheets," O'Toole said.
-- Slowing the free-fall: Banks might be strategically holding back some foreclosures so prices don't fall as fast. "They want to be careful about not releasing them too quickly so they don't drive prices down and hurt the values," O'Toole said.
Besides the shadow foreclosures, yet another wave of distressed properties is in the pipeline. These are homes with delinquent payments for which the banks appear to be prolonging the foreclosure process. Some of that could be because they're negotiating with homeowners about loan modifications or other ways to keep them in the home. But banks also could be deliberately foot-dragging for the same three reasons listed above.
"The problem is that no one knows how extensive (the shadow inventory) is," said Patrick Newport, U.S. economist with the Massachusetts research firm Global Insight. "It's a wild card. If it's a really big number, you'll see prices drop a lot more and deeper problems for the financial system."
From the San Francisco Chronicle - Carolyn Said, Staff Writer
Wednesday, April 8, 2009
Friday, April 10, 2009
How will foreclosure affect credit scores?
The amount of damage to a credit score caused by foreclosure, deed in lieu or a short sale during 2008 and 2009 may be mitigated by the slower economic times, say some credit and legal experts.
FICO may have to adjust its credit scores to lessen the impact of a foreclosure in the past two years, says Todd J. Zywicki, a professor of law at George Mason University.''
It just seems obvious that a foreclosure in 2008 or 2009 doesn't have as much information value as a foreclosure five years ago,'' he says. ''To the extent that foreclosure doesn't predict future behavior as much as it did in the past, you'd expect that the FICO algorithm would change to adjust for that.''
One of the country’s largest credit unions, Golden 1, has already figured out a way to lend to people with a foreclosure on their record by offering a mortgage repair loan specifically for those who have lost a home to foreclosure and who want to buy a new one.
BECU, another large credit union based in Washington State, is about to present a program to fellow lenders, ''How to Lend to the Newly Credit Impaired.”
Source: The New York Times, Ron Lieber (03/14/2009)
Visit us on our website: http://www.ncpflorida.com/
Thursday, April 9, 2009
I’ve tried calling banks directly, why won’t they give me a list of their properties?
Banks do not want to deal directly with the public. When they take a property back in foreclosure, they do one of three things with it: 1) Hold onto it until it’s saleable (i.e. liens cleared, repairs made, etc), upon which time they will proceed with selling it, 2) Hire an auction company to auction it (usually combined with many other properties at the same time) or 3) List it for sale with a real estate agent who then markets it to the public.
We know how to identify foreclosure and short sale properties, and to negotiate with the bank to get you the lowest price possible. It is very important to make sure you are represented exclusively, and not by a listing agent who’s got a responsibility to get the highest price possible for the seller. We work for you alone.
Visit our website at http://www.ncpflorida.com/
We know how to identify foreclosure and short sale properties, and to negotiate with the bank to get you the lowest price possible. It is very important to make sure you are represented exclusively, and not by a listing agent who’s got a responsibility to get the highest price possible for the seller. We work for you alone.
Visit our website at http://www.ncpflorida.com/
Wednesday, April 8, 2009
Why work with a foreclosure and short sale expert?
In today’s market, there are thousands of properties being marketed as “foreclosures” and “short sales.” Unfortunately, not every agent is properly trained or experienced enough to navigate the complicated process of these special transactions. Often times, properties marketed as “short sales” are never approved by the bank for reasons that could have been uncovered in the very beginning given a little research.We have the knowledge and experience necessary to represent you in a foreclosure or short sale purchase, protecting your investment and getting you a great price. With over 25 years of real estate experience, we are proven expert negotiators, working to get you the best deal possible.
Visit our website at http://www.ncpflorida.com/
Visit our website at http://www.ncpflorida.com/
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