mycentralcoastlandman.com

Fannie Mae and Freddie Mac recently extended their foreclosure forbearance programs to give short-term aid to unemployed homeowners, but housing counselors warn that these borrowers will need to look at longer-term solutions.

Making sense of the story

In a forbearance program, a lender agrees not to foreclose on a property and gives the borrower several months’ grace from or reduction in monthly mortgage payments.  The programs work best for temporary setbacks, like job loss, health problems, or natural disasters.

There are drawbacks to the forbearances though. The most-significant drawback is a larger total debt from the smaller payments.  The unpaid balance continues to increase during this time.

The new temporary mortgage payment is often set to 31 percent of the household income; in some cases lenders agree to accept no payments.  Fannie Mae’s extended unemployment program, first offered in the fall of 2010, limits any nonpayment or other forbearance plans to one year, with the second six months requiring approval by both Fannie Mae and the lender.

However, even with the program in place, the lender could still report a mortgage as delinquent, which could adversely affect the borrower’s credit score.

 
Because some agreements add onerous term and conditions, homeowners should also consult with a housing counselor certified by the Dept. of Housing and Urban Development.
Read the full story

California home sales rose for the third consecutive month in December, marking the highest level since January 2011, according to data from C.A.R.  Sales also were up from a year ago, marking the sixth consecutive annual increase.

Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 520,940 in December, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide.  December’s sales were up 3.3 percent from November’s revised pace of 504,420 and were up 0.1 percent from the revised 520,330 sales pace recorded in December 2010. 

The statewide median price of an existing, single-family detached home posted its second consecutive monthly gain, increasing 1.8 percent to $285,920 in December, up from a revised $280,960 in November.  However, the median price was down 6.2 percent from the revised $304,770 median price recorded in December 2010.

Americans’ attitudes on a variety of issues are marginally better than one month ago, according to results from Fannie Mae’s December National Housing Survey. Despite overall low levels of optimism among Americans, consumer sentiment trended in a positive direction in the final months of 2011.

Americans who say the economy is on the right track rose by 6 percentage points since November, while the percentage who say the economy is on the wrong track dropped by 6 percentage points. When asked about housing, more Americans expect home prices to  to increase compared to November and, on average, Americans expect home prices to increase by 0.8 percent over the next year, up from an expected 0.2 percent increase last month.

Highlights of the survey include:
 Thirty-six percent of Americans say that mortgage rates will go up over the next 12 months, up 3 percentage points from November and was even with October.
Seventy-one percent of respondents say it is a good time to buy a home (up 3 percentage points since last month), and 11 percent say it is a good time to sell.
On average, Americans expect home rental prices to increase by 3.5 percent over the next 12 months, up from 3.2 percent in November.
Five percent expect a decline in home rental prices over the next 12 months (tying May 2011 as the lowest point in the past 12 months), while 43 percent of respondents believe that home rental prices will increase.
Thirty-one percent of Americans say they would rent their next home, while 64 percent say they would buy, up 1 percentage point from last month.

More than 2.6 million households are at least 60 days delinquent on their mortgage payments, according to the nonprofit coalition Hope Now. While those who are delinquent 60-120 days can make back payments to help them become current, those who are more than two months behind may need to employ other means to catch up.

Making sense of the story:

Beyond the obvious threat of foreclosure, falling behind on a mortgage can be costly:  Lenders charge late fees as well as legal and administrative costs, and the borrower’s credit score will suffer.  Experts say the sooner a delinquent borrower deals with the situation, the better the chances are of making a full economic recovery.

Borrowers who are determined to stay in their home but cannot immediately make back payments need to start by contacting their lender or a credit counselor to discuss available options.  Among them are devising a repayment plan, modifying the loan, doing a short sale, and adding what is owed back into the mortgage balance.

The first step borrowers should take is to assess their financial situation by looking at the amount of money brought in each month versus what is spent.  Many credit and housing counselors have worksheets on their websites to help with this.

Next, borrowers should collect pay stubs, documentation on other income, two years’ worth of tax returns, two months of saving and checking account statements, and mortgage records.  If the borrower has experienced a hardship, such as a layoff, a divorce, or an illness, they should gather evidence of that, such as unemployment insurance receipts, medical bills, a copy of a doctor’s letter to their employer, or a divorce decree.

Finally, borrowers should talk to their lender, servicer, or an adviser.   The federal Dept. of Housing and Urban Development certifies counseling agencies that provide free advice and assistance, and has a list of them on its website.  Counselors can offer alternatives and prepare a budget to see if the homeowner can afford to stay in the house.

Before agreeing to a repayment schedule, it is important homeowners understand how their lender treats partial payments.  Some credit partial payments toward the balance immediately, while others hold the money in a “suspend account” until the full amount is received.  Some will return the check to the borrower, and some will stop accepting payments after the mortgage is seriously delinquent.
 

California pending home sales fell 9.1 percent in November but were up from a year ago, according to C.A.R.’s Pending Home Sales Index (PHSI)*.  The index was 109.8 in November, based on contracts signed in that month, down from October’s index of a revised 120.9.  However, the index was up 11 percent from November 2010, marking the seventh consecutive month that pending sales rose from the previous year. 

At 55.1 percent, equity sales made up more than half of home sales in November, up from 53.9 percent in October and 54.4 percent in November 2010.

The total share of all distressed property types sold statewide fell to 44.9 percent in November, down from October’s 46.1 percent and 45.6 percent in November 2010.
Of the distressed properties sold statewide in November, 21 percent were short sales, up slightly from the previous month’s share of 20.7 percent and up from last November’s share of 19 percent.

At 23.5 percent, the share of REO sales was down from October’s 24.9 percent, and down from the 26.2 percent reported in November 2010.

 Builder confidence in the market for newly built, single-family homes edged up two points to 21 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for December. This marks a third consecutive month in which builder confidence has improved, and brings the index to its highest point since May 2010.

“This is the first time that builder confidence has improved for three consecutive months since mid-2009, which signifies a legitimate though slowly emerging upward trend,” said NAHB Chief Economist David Crowe. “While large inventories of foreclosed properties continue to plague the most distressed markets and consumer worries about job security and the challenges of selling an existing home remain significant factors, builders are reporting more inquiries and more interest among potential buyers than they have seen in previous months.”

Each of the HMI’s three component indexes registered a third consecutive month of improvement in December. The component gauging current sales conditions rose two points to 22, while the component gauging sales expectations in the next six months edged up one point to 26. The component gauging traffic of prospective buyers gained three points to 18, which is its highest level since May 2008.

California home sales posted an increase both on a monthly and annual basis in November, marking the fifth consecutive month of year-to-year sales increases, according to figures released by C.A.R.

Closed escrow sales of existing, single-family detached homes in California rose to a seasonally adjusted 503,570 units in November, up 2.1 percent from a revised 493,140 in October, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide.

The November statewide median price of an existing, single-family detached home sold in California was $280,960, up 1.0 percent from $278,060 in October but down 5.2 percent from the $296,480 median price recorded for November 2010. 

Home price expectations moved from negative to positive territory in November for the first time in six months, according to Fannie Mae’s November National Housing Survey.  Respondents to the survey said they expect home prices to increase by 0.2 percent over next year. 

“Though their home price expectations have become slightly positive, consumers remain concerned about the direction of the economy and continue to view their household finances as being relatively flat,” said Doug Duncan, vice president and chief economist of Fannie Mae. “Most Americans expect no improvement in their personal financial situation in the next 12 months and will likely remain wary about undertaking the significant financial obligation associated with homeownership until their view of their income, expenses, and job security heads in a more positive direction.”

Highlights from the survey include:
Nearly a quarter (22 percent) of respondents expect home prices to increase over the next year (up 3 percentage points since last month), while 22 percent say they expect home prices to decline, down 1 percentage point since last month. Fifty-three percent say prices will stay the same, a 2 percentage point drop from October.
Approximately one-third of Americans say that mortgage rates will go up over the next 12 months, down 3 percentage points from October and a return to the level seen in September.
Sixty-eight percent of respondents say it is a good time to buy a home (down by 1 percentage point since last month), and just 10 percent say it is a good time to sell, unchanged from the previous two months.

With most lenders requiring borrowers to put down at least 20 percent as a down payment – unless using an FHA or VA loan, or purchasing mortgage insurance – the best holiday gift some people might receive would be help with a down payment on a house.

Making sense of the story

According to a survey by Trulia, the biggest barrier to buying a home these days is saving for the down payment.  The survey, conducted over the summer, found that 51 percent of renters said coming up with money for the down payment was preventing them from buying, while 35 percent identified qualifying for a mortgage as the stumbling block.

Under federal tax law, each individual is permitted to give money or valuables worth up to $13,000 to a single recipient in a calendar year.  A married couple could jointly bestow up to $26,000 a year per recipient.

According to one financial planner, there also is the option of lending a relative or close friend the money for the down payment, or the closing costs, then forgiving the loan in a future year.  The recipient would have to pay interest on the loan until it was forgiven, at which point it would become a gift.

Another way to help with the down payment is to pay other expenses, such as tuition, thereby freeing up money to make a home purchase.  Gifts for educational or medical expenses are not subject to taxes, as long as they are paid directly to the educational or medical institution.

However, prior to giving the money, gift-givers should consider their own financial picture, and they should make sure the recipient is responsible and not behind on other payments that could be subject to debt collection.

The administration announced broad outlines of the revised Home Affordable Refinance Program on Oct. 24. Fannie Mae and Freddie Mac issued guidance last week that filled in most of the details.

Making sense of the story:

HARP 2 greatly reduces or eliminates the risk-based fees Fannie and Freddie charge on many loans and virtually eliminates the chance that lenders will have to pay for losses on loans that go into default if they made underwriting mistakes. It also vastly streamlines the underwriting process.

Although lenders can begin taking applications Dec. 1, it could take several months before the new loans are made. Fannie Mae said it won’t begin buying certain types of refinanced loans until March.

To qualify, the existing loan must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009. The loan balance must be more than 80 percent of the home’s market value. The loan must be current for the past six months, with no more than one late payment in the past 12 months. Those who previously refinanced through HARP are ineligible.

The new program improves on the existing HARP refi program by letting borrowers refinance into a new fixed-rate loan regardless of how much is owed. The existing program caps the new loan at 125 percent of the home’s market value.

Homeowners also can refinance into a new adjustable rate loan that has a fixed rate for at least the first five years, but in this case the new first mortgage cannot exceed 105 percent of the home’s value.

In most cases, borrowers won’t have to pay for a new appraisal (Fannie or Freddie will use their automated in-house appraisals) or have any particular debt-to-income ratio or credit score.

 
Borrowers who refinance through their existing loan servicer generally won’t have to document their income or assets or have a particular credit score or debt-to-income ratio. The lender will only have to verify that one borrower on the loan has a job or other source of income, but not the amount of income.

 
Homeowners who refinance through a new lender will have to meet additional underwriting requirements, but not as many as people who are refinancing through traditional routes.

Borrowers can have a second loan on the house of any amount and still qualify, as long as the holder of the second mortgage resubordinates it to the new loan. Most of the big lenders have agreed to do so, but there is no guarantee they or others will.

 
If borrowers have mortgage insurance on the existing loan, they must maintain it, but they should be able to transfer that insurance to the new loan at the old premium rate, according to Freddie Mac. The big mortgage insurers have agreed to allow this, but again there is no guarantee all will.

There are still many questions about the program, such as what interest rates banks will charge, whether they will impose additional fees or underwriting requirements beyond what Fannie and Freddie require, and whether investors will be willing to buy securities backed by these new HARP 2 loans.