The federal government released some of the broad items that the revamped Home Affordable Refinance Program (HARP) will address today.  While I understand they are attempting to placate the part of the market that has kept up to date on their mortgages while their home value has fallen below their mortgage balance, I don’t get how this is going to help the public in general…and especially the housing market.

While the details of the program are scant so far, it is [...]]]> The federal government released some of the broad items that the revamped Home Affordable Refinance Program (HARP) will address today.  While I understand they are attempting to placate the part of the market that has kept up to date on their mortgages while their home value has fallen below their mortgage balance, I don’t get how this is going to help the public in general…and especially the housing market.

While the details of the program are scant so far, it is the belief of most that homeowners who have been current for their last 6 months on their mortgage and who have missed no more than 1 payment in the last year will meet the bare minimum of eligibility for the program.  Other factors, such as credit score, will also be in play within the determination if someone qualifies or not.

From the side of the banks, I don’t understand why a bank would be incentivized to refinance or take on a mortgage with a loan to value over 100%.  These homeowners are much more likely to default if times get tough. (we’ll see what types of incentives the government ends up giving them)

From a housing market perspective, I don’t see HARP really having any effect.  Those that are currently current on payments and that would like to stay in their home will probably not make a move whether they were given the opportunity to move or not.

All I see this program as is a way to make a certain segment of voters happy.  Those who were current on their mortgage payments, but underwater with their loans, and angry that other people who were behind on their mortgages were getting ‘bailed-out’.  But, as always, its just my opinion…let me know if you think I’m right or wrong.

I’ll update this post as more details become available on HARP.

A provision in which each bank that bundles and sells mortgages and loans as securities will need to keep 5% of that credit risk (thus hopefully giving incentive for those banks to be more careful with who they lend money to in [...]]]> Regulators from the FDIC and Federal Reserve unanimously approved a draft version of mortgage-lending rules that could drastically hike up mortgage costs to potential homeowners.  The two main things I took out of the various articles I read were:

A provision in which each bank that bundles and sells mortgages and loans as securities will need to keep 5% of that credit risk (thus hopefully giving incentive for those banks to be more careful with who they lend money to in the first place).

and

the proposal would eventually reset what constitutes a prime mortgage as only those to borrowers who make down payments of at least 20%, with higher equity levels required for refinances. (with about 46% of homeowners having less than 20% equity in their current homes, this would obviously reduce homeownership through higher costs)

There still could be a good amount that changes between now and when the FDIC and Fed enact these changes.  It should be an interesting (and very important) story to follow over the next 2-4 months.

The article from the Wall Street Journal is here

To help shore up their reserves, FHA is increasing its upfront insurance premium fee to 2.25% (up from 1.75%).  It has also asked congress to [...]]]> There are some changes coming in the FHA requirements that are worth noting.  The Federal Housing Administration has been under pressure recently due to higher defaults and falling reserves.  To be clear, you should know that the FHA doesn’t actually lend money to home buyers, but insures lenders against default of loans that meet FHA requirements.

To help shore up their reserves, FHA is increasing its upfront insurance premium fee to 2.25% (up from 1.75%).  It has also asked congress to increase the annual insurance fee it receives from borrowers.  These changes will take effect this spring.

To guard against defaults, the FHA will be raising the minimum down payment on borrowers with credit scores less than 580 to 10% of the purchase price (currently 3.5%).  This won’t effect the majority of FHA borrowers as fewer than 1% of those borrowers last year had a credit score under 580 (according to LPS Applied Analytics).

Also, the amount of seller paid closing costs will be reduced from 6% to 3% of the purchase price.

Both the 10% down payment and the seller paid closing cost cap will go into effect this summer.

While all of these new provisions will make it a tad more difficult for lenders to push some new borrowers through underwriting, the majority of buyers will be unaffected by everything except for the higher insurance premium.

As always, leave any questions or observations in the comments below.

Fannie Mae and Freddie Mac Change the Appraisal Process

Freddie Mac and Fannie Mae will implement a revised Home Valuation Code of Conduct beginning May 1, 2009. In an attempt to increase the reliability of appraisals, the revised code builds on existing seller-servicer guidelines and will apply to lenders that sell single-family mortgage loans to [...]]]> A lender I’ve worked with in the past sent me the following yesterday afternoon regarding Fannie Mae and Freddie Mac’s change in how appraisals will be ordered:

Fannie Mae and Freddie Mac Change the Appraisal Process

Freddie Mac and Fannie Mae will implement a revised Home Valuation Code of Conduct beginning May 1, 2009. In an attempt to increase the reliability of appraisals, the revised code builds on existing seller-servicer guidelines and will apply to lenders that sell single-family mortgage loans to Fannie Mae and Freddie Mac.

One major difference in the code is that lenders will be required to order appraisals from one central clearing house, which will in turn select an appraiser. The down side of such a process is that lenders will have little to no communication with the appraiser, which means there won’t be an opportunity to have a discussion or touch base with appraisers before they go out to appraise the house. The new code is intended to help assure that borrowers, home buyers and secondary mortgage market investors receive fair and independent property valuations.

In some areas, lenders have already implemented these changes, and in the next few weeks and months, more will have to begin the process.

I understand the reasoning behind it is to ensure there is no behind-the-scenes talking between the lender and the appraiser to influence the appraiser’s final price valuation, but all this is going to end up doing is increase the length of time it takes to close on a home (as well as probably raise appraisal prices because of lack of competition).  I vote a big no for this one.

Additional Resources:
Federal Housing Finance Agency’s News Release
Federal Housing Finance Agency’s Home Valuation Code of Conduct

Check out our new Map Based Search of Homes for Sale in Minnesota

1. Those that were on the fence, really serious about buying, but waiting for the right time may be in the perfect position to get a house [...]]]> Bond and home loan rates rallied late Friday to reach their best levels in years!  While I’m not normally a rate watcher, and definitely not a guy to tell people ‘Now is the time to buy!’ ; I think there is some opportunity to ride this rate dip and do one of two things.

1. Those that were on the fence, really serious about buying, but waiting for the right time may be in the perfect position to get a house at a steep December discount with a great rate attached to it.

2. Those hoping to ride the housing prices out a little while longer before deciding to sell can refi to make it much more palatable during the next year or two.  Now, when refinancing, you always have to consider closing costs to make sure it makes sense, but something to definitely look into.

If you need any help in finding a good mortgage broker, I can always deliver a few suggestions that clients of mine have used in the past.

Those of you in Minnesota, stay warm and stay safe!

NAR President-Elect Charles McMillan sits down with NAR Chief Lobbyist Jerry Giovaniello to discuss the importance of the Housing Stimulus legislation currently pending on Capitol Hill.

Springwise points us to a new online marketplace with the descriptive name Home Equity Share matches home buyers with investors. To be exact: it brings together buyers who can afford monthly payments but not a 20% down payment, and investors who want to get into real estate but don’t want to become landlords or make monthly payments.

Potential home buyers post a profile listing their preferences, including the area they want to buy in, and the price range they’re looking for. [...]]]>

Springwise points us to a new online marketplace with the descriptive name Home Equity Share matches home buyers with investors. To be exact: it brings together buyers who can afford monthly payments but not a 20% down payment, and investors who want to get into real estate but don’t want to become landlords or make monthly payments.

Potential home buyers post a profile listing their preferences, including the area they want to buy in, and the price range they’re looking for. They’re automatically matched with compatible investors, come to an agreement and sign a preliminary commitment. This allows the buyer to become pre-approved for a loan, and to start looking for a property. Once buyer and investor agree on a property, the investor provides the down payment, the buyer arranges a mortgage for his home and moves in. At the end of a specified agreement term—usually three to seven years—the buyer can purchase the investor’s interest in the property, or they can sell the house and share its appreciation in value.

Home Equity Share provides the matching service and contracts at no cost to buyers and investors, but requires that they use a real estate agent who is registered with the company. Agents pay a referral fee of 20% of the commission earned on transactions referred by Home Equity Share.

Unlike P2P lending services we’ve written about in the past, such as Zopa and Prosper, Home Equity Share is targeting a very specific niche: real estate down payments. It matches the parties and provides them with contracts, but doesn’t facilitate the exchange of money. Other niche P2P lending matchmakers to follow?

It may sound hard to believe, but one part of the mortgage market is hot: reverse mortgages. That’s giving older homeowners more options to tap the equity in their homes but also opening the door to more confusion and mistakes.

Only a year ago, homeowners interested in reverse mortgages had little to choose from beyond the plain-vanilla government-backed products that have long dominated the market. Such mortgages essentially allow homeowners at least 62 years old to sell a large chunk of [...]]]>

It may sound hard to believe, but one part of the mortgage market is hot: reverse mortgages. That’s giving older homeowners more options to tap the equity in their homes but also opening the door to more confusion and mistakes.

Only a year ago, homeowners interested in reverse mortgages had little to choose from beyond the plain-vanilla government-backed products that have long dominated the market. Such mortgages essentially allow homeowners at least 62 years old to sell a large chunk of their home equity back to a bank or another lender in exchange for a lump sum, monthly payments or a line of credit.

Now, nearly a dozen large banks and mortgage lenders have launched reverse-mortgage products with lower fees and larger payouts. One lender has reduced the minimum age requirement to 60; others are making loans on second homes and vacation rentals. “Jumbo” reverse mortgages, for houses valued at as much as $10 million, are becoming more common.

With a reverse mortgage, instead of the borrower making payments to the lender, the lender makes a payment or payments to the borrower. The borrower keeps control of the house and doesn’t have to repay the money as long as he or she lives there. When the homeowner dies or moves out, the loan is typically paid off by selling the house, and any money left over goes to the homeowner or the homeowner’s estate.

A better life in retirement

The product is evolving from meeting basic needs to fulfilling the desires of a new generation of retirees, from funding a vacation getaway or recreational vehicle to renting a Paris pied-à-terre. The new options, though, mean more potential for confusion among consumers and a bigger chance that they could miss out on getting the best loans for their situations. MSN’s Full Story