December 29, 2013

Is There Time To Save The Spring?

A reader suggested a topic on changes in lending. “Is there time to save the Spring? We have FHA loan limits dropping, but that could be changed pretty quickly. A little micro taper, same. Prices starting to drop in some areas again. I seem to recall this happening once before after the crash, drops that looked like they’d start to turn the tide back to a more historically normal real estate market, and then they put in the floor.”

The Daily Herald. “Starting Jan. 1 Federal Housing Administration guidelines change and the limit for single family homes goes down to $271,050 from $323,000. That means that if you’re wanting to buy a home with an FHA-insured loan you will get less house than you could if you closed by the end of the month. For two-family homes the new FHA limit will be $347,000, and $419,425 for three-family homes and $521,25 for four-family homes in Utah County.”

“The good news for local sellers is that they, on average, are getting nearly their asking price for well-priced homes. That doesn’t mean that listings aren’t expiring or being taken off the market. Many of the potential sellers I’ve talked to whose listings have expired say they now want to wait until spring before relisting. Many are hopeful that waiting will net them more cash for their homes. The threat, however, is that interest rates are ticking upward, which could affect their sales price.”

“Meanwhile, as the economy gets stronger, mortgage rates are also working their way up, which affects both buyers and sellers. It’s not the time to wait to buy. With every uptick you buy less home or pay more for the home you want. So now buyers have a one-two punch to deal with: rising prices and interest rates. And then FHA comes along and lowers the limits. Go figure. Fully one third of all home purchases in this country are funded with an FHA loan.”

The Milwaukee Journal Sentinel. “Lenders say new federal rules that stress a cookie-cutter approach to who qualifies for a mortgage are about to make it more difficult and time-consuming for many home buyers to get financing. The rules, which take effect in January, are intended to ensure borrowers can repay their loans. They contend the standardized rules issued as part of Congress’ financial reform package are an overreaction that will make it tough for some loan-worthy consumers to get a mortgage; perhaps enough of them to affect the housing market recovery.”

“‘This is going to really affect consumers,’ said Thomas J. Pamperin, chairman of the Wisconsin Bankers Association. ‘This is going to be a big deal.’”

“One key concern of bankers is what the federal Consumer Financial Protection Bureau is calling a ‘qualified mortgage.’ Under a rule that takes effect Jan. 10, a borrower’s debt expenses must be no more than 43 percent of total gross income to be eligible as a qualified mortgage. A qualified mortgage has the bureau’s ’safe harbor’ protection, meaning a lender is protected from lawsuits by homeowners who claim their foreclosure resulted from flawed underwriting.”

“The new rules say mortgages that exceed the 43 percent debt-to-income cap won’t have the stamp of approval by the Consumer Financial Protection Bureau and wouldn’t have the same legal shield if the loan ever went bad. Mortgages underwritten to the standards of Fannie Mae and Freddie Mac and other federal agencies also will be considered qualified mortgages.”

“Pamperin said the rules don’t take into account that banks in many smaller communities know their customers and whether they can make their monthly mortgage payments _ even if their debt-to-income ratio is greater than 43 percent. ‘There’s a lot of people who are self-employed. There’s a lot of people who make their living from the land in some manner. When you start talking about income … these people really know how to make a dollar go a long way,’ Pamperin said. ‘So when there are rules that come out that say, ‘We know what people need to spend on housing,’ it’s difficult for these people to understand that somebody in Washington is making the decision as to who’s going to qualify for a mortgage.’”

“The financial condition of borrowers will receive more scrutiny as lenders attempt to make sure debts and income are what borrowers say they are, bankers say. ‘Right now we’re turning over boulders in someone’s history,’ said Michael Kellman, senior vice president for consumer credit sales at Brookfield, Wis.-based North Shore Bank. ‘Now we’re going to be turning over every pebble.’”

8 News Now. “Underwater Nevada homeowners may end up owing tens of thousands more in taxes if the federal government does not act soon. When people short sell their home or when banks forgive part of a homeowner’s loan, the feds count that as extra income on taxes. Congress is set to let the Homeowners Tax Relief Act expire at New Years, which means Nevadans already in debt could face even more debt.”

“Foreclosure expert Tony Martin says 2013 was a roller-coaster year for the Las Vegas housing market. ‘If you take away the ability to short sell, I think the only option that you have for banks to raise capital is to auction,’ Martin said. If auctions get flooded, then all Las Vegas home values, which are slowly climbing out of recession lows, could start sliding once again.”

The Portland Business Journal. “Homebuyers in Portland and 21 other metro areas are more optimistic about their chances of finding the right home as the residential real estate market cools for the winter. Redfin, an online real estate firm, surveyed 518 active homebuyers who have toured with a Redfin agent in the months since August the week of Nov. 21 to 24. Interestingly, homebuyers showed unreasonable expectations around mortgage interest rate. Redfin said more than 80 percent of buyers believe that the ‘normal’ rate for a 30-year mortgage is below five percent. In reality, the interest rate for a 30-year mortgage has averaged 6.7 percent since 1990.”

“Of concern, 40 percent of homebuyers told Redfin they would be unable or unwilling to buy if mortgage rates rise further — a likely event.”

Bits Bucket for December 29, 2013

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