Obama offers help for younger, first-time homebuyers

WASHINGTON 

President Barack Obama moved Wednesday to make it cheaper for first-time and younger buyers to take out a mortgage.

Obama lowered the mortgage-insurance premium for borrowers who have a down payment of just 3.5 percent of the home’s purchase price and finance the rest of the purchase with a loan backed by the Federal Housing Administration.

The reduction is expected to save the typical first-time homebuyer an average of $900 a year on the insurance, the White House said. The insurance is required because they’re financing so much of the purchase and the loans are riskier.

Existing homeowners who refinance into an FHA mortgage will see similar reductions, the White House said.

The White House estimated that the change will help 800,000 homeowners save on their mortgages and 250,000 new buyers save on mortgage payments over the next three years.

Obama, expected to highlight the lower-cost mortgages Thursday during a visit to Arizona, has been under pressure from the housing sector to help lower costs for borrowers seeking to buy with a low down payment – often younger buyers and first-time homebuyers, both a crucial link in home sales.

“We do not see first-time buyers getting into the marketplace. They don’t have a chance to get onto that first rung of housing,” said Chris Kutzkey, president of the California Association of Realtors.

While mortgage lending rates have been near record lows for several years, that has benefited the most creditworthy borrowers, who are often the wealthiest of homebuyers. The middle-income segment of the market, with higher debt loads, has faced tougher lending standards. Stagnant income has crimped its ability to put more down toward a home purchase.

“Mortgage underwriting standards have been overly stringent,” said Lawrence Yun, chief economist for the National Association of Realtors.

The premiums rose sharply after the financial collapse and have not come down even as the economy and the housing market have improved.

“It’s almost as if government is ripping off the consumers,” complained Yun, noting that premiums were raised to minimize risks to taxpayers of borrowers defaulting on government-backed loans. “But what has happened is they were punishing current borrowers for the sins of past mistakes. Current borrowers did not harm the market, but they are paying the excessively high premiums.”

One consequence is the shrinking number of new homeowners. Over the past four years, first-time homebuyers shrank as a percentage of all FHA loans – from 56 percent down to 39 percent, he said.

First-time buyers are a key part of the real estate chain, needed so existing homeowners can sell and purchase nicer, perhaps newly built homes.

“Future homebuyers are paying a higher expense than is necessary and that is having an effect on housing,” said David Stevens, president of the Mortgage Bankers Association.

Ironically, the premiums went up from 2009 to 2011, a period when Stevens was the No. 2 man at the Federal Housing Finance Agency, the regulator of mortgage giants Fannie Mae and Freddie Mac.

In a related move, the new head of the Federal Housing Finance Agency, former North Carolina Democratic Rep. Mel Watt, took steps in late December to make it possible for Fannie and Freddie to purchase loans that had down payments as low as 3 percent instead of the prior limit of 5 percent.

The move, similar to lowering FHA premiums, was designed to spur more first-time homebuying, boost the economy and compete with FHA loans.

“This sluggish recovery in housing has to change course for the economy to continue its growth trajectory,” Stevens said. “So in the short run, we would view premium reduction as a positive for the economy.”

House Financial Services Committee Chairman Jeb Hensarling, R-Texas, and Senate Banking Committee Chairman Richard Shelby, R-Ala., have in the past opposed lowering the premiums. They want to see less government involvement in housing finance and fear lower premiums mean taxpayers are still on the hook if a large number of loans go sour, as they did from 2007 to 2009.

The Obama administration has the power to lower premiums on its own and wouldn’t need legislation or congressional approval to act alone.

Another concern for would-be buyers and sellers is whether the longstanding mortgage-interest tax deduction might be removed or scaled back for the wealthy. Both of these ideas have been floated in discussions about how to fix the nation’s long-term fiscal imbalances.

“We really want to see no change to the tax incentives,” said Kutzkey of the California real estate group. “A lot of people are sitting on the fence. . . . They don’t know if they can move up.”

Economic conditions are increasingly favorable for a return to normalcy in housing. The economy is growing at a brisk pace, falling gasoline prices leave people with more spending power and hiring picked up sharply in 2014. A tight rental market also may soon push more people into considering home ownership.

“Apartment rents are rising at the highest pace in seven years, which means some of the renters . . . will seriously consider buying,” said Yun of the national real estate group.

For more information Contact

Jerry Gusman, The Gusman Group

888-213-4208

jerryggroup@aol.com

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Mortgage Forgiveness Debt Relief Act Extended Into 2015

Just before Christmas, President Barack Obama signed into law H.B. 5771, known as the Tax Increase Prevention Act of 2014, which retroactively extended 55 tax provisions – including one that provides distressed homeowners relief on forgiven mortgage debt.

The bill was introduced by U.S. Representative Dave Camp (R-Michigan), Chairman of the House Committee on Ways and Means, on December 1, 2014. Two days later, on December 3, the bill passed in the House by a vote of 378 to 46. On December 16, the Senate passed the bill by a 76 to 16 vote. The president signed the bill into law on December 19.

The tax provisions covered by the bill, which expired on December 31, 2013, are retroactively extended for one year until December 30, 2014, and will be effective on income tax returns filed for the year 2014. One of those provisions, covered under Section 102 of the bill, allows homeowners to exclude forgiven mortgage debt (the remaining mortgage loan balance when a home is sold in a "short sale" to avoid foreclosure) from their gross income when filing tax returns.

This provision is an extension of the Mortgage Forgiveness Debt Relief Act of 2007, originally signed into law by President George W. Bush, which originally relieved distressed homeowners from having to pay taxes on forgiven mortgage debt for the three calendar years of 2007 through 2009. That tax exemption was extended three more years until the end of 2012 with the Emergency Economic Stabilization Act of 2008, and it was extended until the end of 2013 with the American Taxpayer Relief Act of 2012.

Section 104 of the new bill allows taxpayers who own homes to count qualified mortgage insurance premiums as interest for the purpose of mortgage interest deduction on their tax returns.

"USMI commends passage by Congress last night of a one year extension of vital homeowner tax relief,"U.S. Mortgage Insurers said in a prepared statement. "We are especially pleased that the legislation includes the tax-deductible treatment of mortgage insurance premiums for low and moderate income borrowers.  We look forward to working with Congress towards permanent enactment of this important tax relief for homeowners."

Many of the lawmakers who voted to pass the bill agreed that while extending the tax breaks another year is a step in the right direction, a more permanent solution is needed.

"I will support this bipartisan compromise but I would have preferred a two year tax extenders agreement that gave working families and Wisconsin businesses more long-term certainty," said Senator Tammy Baldwin (D-Wisconsin), one of the 76 senators who voted in favor of the bill. "Wisconsin families and businesses don’t plan on one year increments and we need long-term solutions, not short-term Band-Aids."

Senator John Boozman (R-Arkansas), who voted in favor of the bill, said he believes the nation's tax code needs reform in order to make things fairer and simpler for every American.

"However, in the interim, extending these tax provisions is just plain commonsense," Boozman said. "By doing so, we prevent tax increases on hardworking Arkansans, as well as small businesses and farmers who are our state’s economic engine."

For more informationj contact

Jerry Gusman, The Gusman Group

888-213-4208

Jerryggroup@aol.com

Nearly 70 Percent of Industry Professionals See Lower Down Payment As Positive

The majority of mortgage industry professionals said they believed that the lowering of the down payment to 3 percent for first-time homebuyers by Fannie Mae and Freddie Mac was a step in the right direction for the housing market, according to theCollingwood Group's November 2014 Mortgage Industry Outlook Report released earlier this week.

In a survey conducted online distributed to a diverse group of mortgage and housing industry professionals, 69 percent of respondents said that lowering the down payment was a move in the right direction for housing, while 31 percent said it was a move in the wrong direction, according to the Collingwood Group. Though the survey respondents represented professionals who work in all phases of the mortgage process, the largest percentage of respondents (50 percent) were lenders or originators.

According to the Collingwood Group, the survey respondents who believed lowering the down payment was a positive move said it reflected concern of policymakers with current market dynamics, and it indicated a willingness on the part of the Federal Housing Finance Agency (FHFA) to ease lending standards. At the same time, most respondents pointed out the existence of other high loan-to-value (LTV) products and said they believed the Federal Housing Administration (FHA) offered the best option.

"The announcement of a low down payment mortgage option may create more opportunities for buyers to afford housing; however, it falls short of appropriately loosening tightened credit standards for other LTV loans," one anonymous survey respondent said in the report. "The 97 percent allows the GSEs to capture loans that would otherwise go to FHA."

According to the Collingwood Group's report, this point raised the question as to whether FHA would lower its insurance premiums sometime in 2015 in order to compete. A spokesperson said it has not been determined whether the premiums will be lowered.

"FHA has made no decisions regarding the premiums," HUD press secretary Cameron French said. "We are regularly evaluating a number of factors to ensure our premiums are at the right levels. As a result of the most recent annual report, we are looking through new information and will use that to inform any future decisions."

For more information contact

Jerry Gusman, The Gusman Group

jerryggroup@aol.com

GSEs Officially Lower Down Payment to 3 Percent for Qualifying First-Time Homebuyers!!

Following months of talk and speculation, bothFannie Mae and Freddie Mac announced on Monday they will begin allowing qualifying first-time borrowers to purchase homes with just a 3 percent down payment.

By lowering the down payment down to 3 percent, leaders from the GSEs and the Federal Housing Finance Administration (FHFA) hope to increase homeownership and particularly household formation by offering loans to those who can afford mortgages but lack resources to make a 20 percent down payment plus closing costs.

Those who have pushed for the lower down payment, such as FHFA Director Mel Watt, have endured criticism from lenders due to the perceived risk involved with making a mortgage loan such a high maximum loan-to-value ratio.

"These underwriting guidelines provide a responsible approach to improving access to credit while ensuring safe and sound lending practices," Watt said in a prepared statement. "To mitigate risk, Fannie Mae and Freddie Mac will use their automated underwriting systems, which include compensating factors to evaluate a borrower’s creditworthiness.  In addition, the new offerings will also include homeownership counseling, which improves borrower performance. FHFA will monitor the ongoing performance of these loans."

Freddie Mac has announced the launch of Home Possible Advantage, which is an affordable, conventional mortgage with a maximum loan-to-value ratio of 97 percent to qualified low- and moderate-income borrowers. Home Possible Advantage mortgages can be used either to buy a single unit property or for a "no cash out" refinance of an existing mortgage, and they are available as 15-, 20-, and 30-year fixed rate mortgages.

In order to qualify for a Home Possible Advantage mortgage, first-time homebuyers must participate in an approved borrower education program, such as CreditSmart offered by Freddie Mac.

"Home Possible Advantage gives qualified borrowers with limited down payment savings a responsible path to homeownership and lenders a new tool for reaching eligible working families ready to own a home of their own," Dave Lowman, EVP of Single-Family Business at Freddie Mac said. "Home Possible Advantage is Freddie Mac's newest effort to foster a strong and stable mortgage market."

Likewise, Fannie Mae is now offering mortgage loans with a maximum 97 percent LTV ratio to qualifying first-time homebuyers. Such a mortgage can be obtained through Fannie Mae with a 3 percent down payment under Fannie Mae's standard offering or its My Community Mortgage Product if one of the co-borrowers is a first-time homebuyer.

In addition, homeowners with an existing Fannie Mae mortgage who are not eligible for the Home Affordable Refinance Program (HARP) can refinance their loan up to the level of 97 percent LTV if they meet eligibility requirements.

"Our goal is to help additional qualified borrowers gain access to mortgages," said Andrew Bon Salle, Fannie Mae Executive Vice President for Single Family Underwriting, Pricing and Capital Markets. "This option alone will not solve all the challenges around access to credit.  Our new 97 percent LTV offering is simply one way we are working to remove barriers for creditworthy borrowers to get a mortgage. We are confident that these loans can be good business for lenders, safe and sound for Fannie Mae and an affordable, responsible option for qualified borrowers."

In order to mitigate risk and ensure the loans Fannie Mae acquires are properly underwritten, the company has implemented practices that include requiring income documentation and verification and eliminating risk-layering on purchase money loans.

Fannie Mae reported in its announcement regarding the new loan guidelines that private capital will be in the first loss position. Mortgage insurers and other risk sharing partners must conclude that the lower down payment loans are prudent in order for them to be originated and sold in the secondary market to Fannie Mae. Also, whereas some lenders have tightened mortgage availability due to uncertainty around the circumstances that would result in a loan repurchase request, Fannie Mae is working to provide lenders withgreater clarity regarding these requests.

Also, to help better evaluate risk on loans, Fannie Mae is offering new tools to lenders, such as Collateral Underwriter, which will be available early in 2015. It is the same appraisal review tool that Fannie Mae uses and will be available to Fannie Mae's customers at no additional charge.

For more information contact

Jerry Gusman, The Gusman Group

888-213-4208

jerryggroup@aol.com

I Want To Sell My Home? Is The Market Right To Sell?

Have you been thinking about selling your home? Been waiting for the values to rise or your local market to get better so that you can get maximum price?

As we wind down 2014 we experienced a market of many changes. We started off the year in a sellers market. With low inventory and prices at their peak. We quickly however saw a dramatic change after the first quarter of the year to a buyers market, Even though inventory was still low buyers became fewer for many reasons. Lender guidelines becoming more stringent, and loan limits in some areas lowered. For what ever reasons many buyers left the market making seller compete for the smaller pools of buyers. This resulted in properties sitting on the market longer and in mid year price reductions were the norm.

So is now a good time to sell? Will 2015 bring a better market for sellers? Although we don't see a lot that will change in 2015, Maybe the elections being concluded will instill more of a sense of security and ease minds to take on the obligation of a mortgage payment. This for sure will be a welcome change. In my opinion this is one of our biggest hurdles to overcome. 

In parts of Southern California's Inland Empire, areas like Rancho Cucamonga, Upland, North Fontana, FHA will only loan up to 355k. This is the maximum loan amount for these areas where the average price of a home is around 400K. Statistics show that over 50% of home buyers utilized an FHA loan. Does this nmean we have lost over 50% of our potential buyers in these areas? It sure appears so and explains another reason for the slow down in the market.

Should you still sell?  Absolutely! You can never know exactly what the future will bring. But, it's a good bet the new year will bring higher interest rates, making house payments less affordable. As the market slows so will home values. Inthe beginning of 2014 the low inventory spurred buyers over paying for homes just to be able to get a home, bidding wars were common raising the prices. Now properties go for months not days with no interest causing sellers to lower prices and eventually lowering values. Get your home on the market before this happens......it's already happening in some areas.

There are many reasons to sell now besides the few I mentioned. Price your home right and hire a savvy agent that will market your home. The key to getting top dollar for your home is exposure. Exposing your property to as many potential buyers as possible to find the one that is willing to pay your asking price. The beginning of the year also brough many seller to sell on thier own, For Sale By Owner. That works better in a sellers market like we had then, but, not in this market. You need to utilize an agent that specializes in marketing homes not just listing them. Also using an agent has many legal benefits and liability concerns that will side in your favor. In most cases using an agent will raise your selling price at least enough to cover your costs......SO what do you have to lose?

Here's to a great 2015 selling season!

Freddie Mac Announces New Foreclosure Prevention Guidelines, Revisions

Government-sponsored enterprise Freddie Mac has announced a set of new loss mitigation and foreclosure prevention guidelines and revisions in Guide Bulletins 2014-19 and 2014-20 that include a new deeds-in-lieu of foreclosure incentive, increased foreclosure timelines, and additional foreclosure relief for service members and their dependents.

Freddie Mac is offering a supplemental incentive of up to $7,000 for new borrower evaluations for deeds-in-lieu of foreclosure that are conducted on or before December 1, 2015. Borrowers in Connecticut, District of Columbia, Illinois, Maryland, Massachusetts, New Jersey, New York, or Pennsylvania who complete a Freddie Mac standard deed-in-lieu of foreclosure transaction are eligible. The new deed-in-lieu borrower incentive is scheduled to go into effect on February 1, 2015, but servicers at Freddie Mac have been encouraged to implement the new incentive as early as November 14, 2014.

Foreclosure timelines have been increased in 47 jurisdictions for all foreclosure sales completed on or after November 1, 2014, as a result of Freddie Mac's recent review of state foreclosure timelines. An updated list of Freddie Mac's state foreclosure timelines can be found in Guide Exhibit 83.

As part of Freddie Mac's commitment to active duty servicemembers, Freddie Mac is offering additional foreclosure relief to service members and their dependents. Foreclosure relief will be extended to mortgages while the service member is active for one year after military service ends when the borrower: 1) is a service member and the mortgaged property is the service member's primary residence, regardless of when the mortgage loan was originated; 2) is a dependent of the service member and the mortgaged property is the primary residence of the service member or his or her dependent; 3) was a service member who died during active military service and the mortgaged property continues to be the primary residence for a dependent of the service member. Servicers can determine if a borrower is eligible for these benefits by checking Freddie Mac's Mortgage Relief Options for Service Members web site.

Most Industry Professionals Expect Business to Change Little in Next Six Months

In a survey conducted as part of The Collingwood Group's Mortgage Industry Outlook Report for October 2014 released on Monday, the majority of mortgage industry professionals who were surveyed said they did not expect business conditions to be drastically different in the next six months.

Along a one to 10 scale with one being "much worse" and 10 being "much better," 34 percent of respondents said they expected business conditions to be "a little better" in six months (a six on the scale), while 22 percent said they expected business conditions to be "a little worse" (a five on the scale), The Collingwood Group reported. Many respondents said seasonal trends tend to affect their outlook on business conditions, such as one lender who reported that the winter months hurt production last year, and they expected that to be the case again this year.

Only about 3 percent of respondents said they thought business conditions would be much worse in six months, while only about 1 percent responded they thought business conditions would be much better, according to The Collingwood Group. A majority of respondents indicated "uncertainty, yet tepid optimism" regarding business conditions, The Collingwood Group said in the report.

The Collingwood Group reported that none of the survey respondents expected the results of the recent mid-term election to significantly impact the mortgage industry.

"I remain optimistic we’ll see a move towards collaboration," said Collingwood vice chairman Brian Montgomery, who is a former FHA commissioner. "The Republicans will hold both chambers for the first time in almost a decade so I suspect they’ll be anxious to move forward on a host of issues that go beyond housing finance reform."

Likewise, most survey respondents said there had been little change in business conditions since this time last year. Business conditions were either "a little worse" for 22 percent of respondents or "a little better" for 31 percent, according to The Collingwood Group. Overall, the numbers were almost split 50-50 when rating business conditions better or worse since last year – 48 percent said they were worse while 52 percent said they were better, according to The Collingwood Group. About 4 percent said business conditions were much worse since last year, while about 1 percent said they were much better.

For more information contact

Jerry Gusman, The Gusman Group

888-213-4208

Survey: Many Still Believe Housing Recovery Still Three to Five Years Away

In a quarterly survey of more than 100 real estate experts and economists, real estate data firm Zillowfound 40 percent of respondents believe it will take another three to five years for the housing market to normalize, based on current home price trends and homebuyer activity.

Nearly a third of panelists took a more optimistic view, predicting the market will stabilize one to two years from now, while one in five responded that housing has either already returned to normal or will within the next 12 months.

When asked about headwinds facing the market right now, respondents pointed to low household formation rates, which have been stymied in part by a challenged economy. According to another recent study from Zillow, more than a third of adults living in the U.S. were living with at least one roommate as of 2012, up from a quarter in 2000.

While those renters represent millions of potential new formations in the years to come, they remain stuck where they are as jobs and wages slowly grow.

Demographic issues are also at play, Zillow reported. While more millennials seem to be holding off on major commitments—including homeownership, marriage, and parenthood—a growing number of Americans nearing retirement age are also opting to stay in their homes longer, keeping the nation's housing inventory from making any meaningful recovery.

"We've reached a point in the recovery where the only real cure-all is time," Zillow Chief Economist Dr. Stan Humphries said. "[T]he landscape is slowly changing, as incomes begin to grow, negative equity fades and new households start to form. These shifts won't occur overnight, but they are happening. Patience will be a virtue over the next few years as we wait for these traditional fundamentals to more fully take hold in the market."

Repeat Foreclosure Percentage Increases to Tie All-Time High

The percentage of September's foreclosure starts that were repeat foreclosures rose by two percentage points month-over-month to account for 53 percent of foreclosure starts, tying the highest percentage for a single month, according to Black Knight Financial Services' September 2014 Mortgage Monitor.

In all, there were 91,000 foreclosure starts nationwide during September, an increase of 11.5 percent from August but a decrease of 16.5 percent from September 2013, when 109,000 foreclosure starts were reported, according to Black Knight. For September 2014, Black Knight reported that 48,200 of the 91,000 foreclosure starts were repeat foreclosures – a total of 53 percent, which tied July 2014 for the highest percentage in a single month since Black Knight began tracking the data in January 2008.

September 2014's percentage of repeat foreclosures represented an increase of 2 percentage points from August (41,500 out of 81,600, for 51 percent) and 4 percentage points from September 2013 (53,400 out of 109,000, a total of 49 percent). September 2014 was the eighth consecutive month in which the percentage of repeat foreclosures accounted for 50 percent or more of foreclosure starts and the 28th consecutive month in which the percentage totaled 40 percent or more. The percentage has not been below 40 percent since May 2012, when 80,800 out of 218,900 foreclosure starts were repeat foreclosures for a total of 37 percent, according to Black Knight.

The lowest percentage of repeat foreclosures was reported in February 2008, just prior to the housing bust, when 29,100 out of 205,000 foreclosure starts were repeats (14 percent). The percentage has been 20 percent or more every month since March 2009; the last month where repeat foreclosures made up less than 20 percent of foreclosure starts was February 2009 (48,200 out of 265,300, 18 percent), according to Black Knight.

The highest overall number of repeat foreclosures for any one month was reported in March 2011, when 109,500 repeat foreclosures were reported out of 263,900, for a total of 41 percent. The only other month in which the total number  of repeat foreclosures exceeded 100,000 for a month was in March 2012 (103,800).

For more information contact

Jerry Gusman, The Gusman Group

888-213-4208, jerryggroup@aol.com

Fannie Mae Expects Slow But Sure Housing Growth in 2015

Where the U.S. housing market is concerned,Fannie Mae chief economist Doug Duncan said he is anticipating overall weaker home sales in 2014 than in 2013. But he expects that overall home sales in 2015 will post their best performance since 2007 despite seeing only moderate growth for the year.

The forecast on the state of the nation's housing market and on the overall economy were included in the Fannie Mae Economic & Strategic Research Group's October 2014 Economic Outlook, published on Thursday.

"We lowered our expectation for housing starts just slightly to one million units for 2014, but our view of mortgage originations has not changed," Duncan said. "Our estimate for 2013 was in line with the recent release of 2013 data under the Home Mortgage Disclosure Act, and our projection of total production in 2014 is little changed at approximately $1.1 trillion. For 2015, we are cautiously optimistic that ongoing labor market improvements, low mortgage rates, rising inventories, and some easing of lending standards will boost home sales by roughly 5.0 percent. However, we still believe housing will continue along its upward grind rather than have the breakout year some are expecting."

Economic growth has been slow on a global scale this year, but that has not dimmed the outlook for the U.S. economy, according to the findings of Fannie Mae's ESR Group. Real economic growth in the U.S. seems poised to exceed 3.0 percent for the second half of 2014, which is expected to provide a solid basis for continued growth into 2015.The slow global economic growth may prevent the Federal Reserve Board from making any interest rate policy changes until Q3 2014, it has not prevented a positive outlook for the economy in the U.S.

"Given the expected strengthening economic activity in the U.S. in the second half of the year, we continue to expect to finish just above 2 percent growth for all of 2014," Duncan said. "The risks are tilted to the downside due to current geopolitical events in Russia, Ukraine, Hong Kong, and the Middle East, as well as the economic slowdown in the Eurozone, China, and Japan. However, recent data suggest these factors have not significantly swayed American consumers. Real consumer spending is poised to pick up in the second half of 2014 from the first half, due in large part to improving labor market conditions, continued declines in gasoline prices, and a subdued pace of inflation."

For more information contact

Jerry Gusman, The Gusman Group

(888) 213-4208