Fannie Mae Allows Lease Back Of Foreclosures
In a recent announcement Fannie Mae has agreed to mirror the
Freddie Mac program to lease properties back to homeowners
that are in foreclosure. This benefits consumers and it will help
families get back on their feet until they are ready to finance their
house once again. This is a proactive step to allow individuals
and families to have the time that they need to regain control of
their financial lives.. While the lease back program solves a large
problem for the homeowner - A roof over their head - It does not
address other credit problems that the consumer faces. Steven
Stark, COO and General Counsel for A New Horizon Credit
Counseling Services, Inc., a national credit counseling agency
offered that “in order for the consumer to fully recover from his
or her financial distress, leasing back the home that they formerly
had owned is a wonderful first step. It prevents the homeowner
from being displaced at great financial and emotional expense.”
The underlying reason for these homeowners to be in default stems
from a host of credit problems resulting in an unmanageable debt
situation. Homeowners may be living outside of their means in
addition to carrying too much credit card debt . Consequently, they
are unable to pay their bills and, in turn, they default on their mortgage.
This new program may help them get back on the right track financially.
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10 Questions On The Volatile Housing Market *
The U.S. housing market has been in a slump for the past four
years. When will it ever end?
In recent years, real estate has proven as jittery and unreliable
as any other market. The average U.S. home price nearly
doubled between January 2000 and April 2006, according to
the First American LoanPerformance index. Since then, the
average has fallen about 30%. The drop has been 53% in the
Las Vegas metropolitan area and 39% in Miami, where about
a quarter of all households with mortgages are behind on their
payments or in foreclosure. The value of your home might be
determined more by whether the neighbors keep their jobs than
whether the house has ample light and closet space.
Here is a guide to navigating a fractured and volatile market:
1. Is the housing market getting better?
It has shown some signs of healing this year, but the much-touted
recovery is tentative and fragile.
Home sales have increased from the severely depressed levels
of 2008. The inventory of unsold homes listed for sale also is down.
Bidding wars are breaking out for foreclosed homes in the sorts of
neighborhoods (near jobs and decent schools) that attract both
first-time buyers and investors seeking rental properties.
But more than 6.7 million U.S. households with mortgages, or about
13%, are behind on their payments or are in the foreclosure process,
according to the Mortgage Bankers Association. Eventually, many
of them will lose those homes, sending more supply onto the market.
Unemployment has continued to rise, and the housing market is
unlikely to show a sustained recovery until job growth resumes.
While the supply of middle-class homes on the market has declined
somewhat, it remains ample in most places. And there is a huge
glut of high-end houses for sale in many areas. That means prices
of high-end homes might still have a long way to fall.
2. When will housing bottom out?
There probably won’t be any clear turning point. Monthly indicators,
such as home sales and prices, tend to bounce erratically from month
to month, making it hard to discern the underlying trend. And the
housing bust will end at different times in different places. House
prices already might have bottomed out in the coveted Virginia
suburbs with short commutes into Washington, D.C., for instance.
But it probably will be years before all of the unsold condos find
buyers in parts of Florida.
Generalizations about states or metropolitan areas don’t say much
about what is happening in your neighborhood. In Summit, N.J., known
for good schools and an easy, 45-minute train commute to Manhattan,
the median home price in September was up 1.2% from a year earlier,
according to Otteau Valuation Group, an appraisal company. In Atlantic
City, N.J., which suffers from too much speculative building of
condominiums and weak demand for vacation homes, the median
price is down about 12% from a year ago.
3. What signals should I watch to determine whether my local market
is improving?
One way to get a sense of supply is to ask a good local real estate
agent for stats on how many homes are listed for sale in your town
and how many months it would take at the current sales rate to absorb
that supply. Anything over about six months generally is considered
high, meaning that sellers might have to cut prices. Another way to get
a sense of a neighborhood’s health is to count the number of for-sale
signs and vacant houses. If there are more than a couple vacant homes
in a block, that might be a bad sign, particularly if no one is taking care
of them.
The supply of homes listed for sale has fallen very sharply in some areas.
But the supply is likely to balloon again in many areas with a renewed
surge in foreclosures. Many local newspapers provide information on
foreclosure filings.
Demand depends heavily on the job market. The U.S. Bureau of Labor
Statistics provides unemployment rates by metropolitan area. In
September, they ranged from 2.9% in Bismarck, N.D., to 30% in
El Centro, Calif. State and local agencies provide job-market data,
too. Celia Chen, a housing economist at Moody’s Economy.com, says
help-wanted signs can be a useful local indicator; if you start seeing more
of them around your neighborhood, that is a sign that business in your
area could be starting to recover.
4. How can I figure out the value of my home?
You never know for sure what a home will fetch until you put it on the
market, and then it is partly a matter of luck. Will the eager buyer who
shares your taste in home style and neighborhood show up on day
one or day 200?
Some Web sites — including Zillow.com, HomeGain.com and
Cyberhomes.com — provide estimates of individual home values.
These estimates are largely based on recent sales of nearby homes,
and in some cases they are wildly off the mark. But they often provide
a ballpark idea of a home’s value.
You might come closer to the real value by talking to a local agent and
looking at recent prices for homes that you know are very similar to
yours. If you want to be more scientific and don’t mind paying a few
hundred dollars, hire a professional appraiser.
5. Does it matter whether I’m “under water”?
At least you have plenty of company. About 20% of owners of
single-family homes with mortgages owe more than the current
estimated value of their homes, according to Zillow.com.
If you can afford your monthly payment and don’t need to move soon,
that might not be a big problem. But it is hard, and sometimes impossible,
to refinance a mortgage if you are under water, and you will take a bath if
you have to sell the home now. Some people who can afford to make
their monthly mortgage payments are deciding it doesn’t make sense to
do so because they don’t expect their home values ever to recover to past
peaks, and they could rent similar houses for much lower monthly costs.
6. If I lose my home to foreclosure, how long will it take to repair my credit
record?
It probably will be three to five years before you can qualify for a home
mortgage insured by the government, depending on your circumstances,
and that assumes you have re-established a record for paying your bills
on time. The foreclosure will remain a blot on your credit record for seven
years, likely raising your interest costs even if you do get another loan. If
you pay bills on time, keep your credit-card balances low and don’t apply
for too many cards, you can make a “slow, gradual improvement” in your
credit score, says Tom Quinn, a vice president at Fair Isaac Corp., which
provides tools for analyzing credit records.
7. If I’m renting, is now a good time to buy a house?
It may well be. Prices in most areas are well below their peaks, even if
they haven’t hit bottom. Don’t kid yourself that you can time the bottom
of the market perfectly. But don’t feel any pressure to buy in a hurry,
because the supply of housing is likely to remain ample for years in
many areas.
Generally, it doesn’t make sense to buy unless you expect to remain in
the house for at least four or five years, because the transaction costs –
including commissions for real estate agents and mortgage fees — are
heavy.
But now is clearly a good time to rent. Many landlords need tenants
badly. The national apartment-vacancy rate in the third quarter was
7.8%, the highest in 23 years, according to Reis Inc., a New York
research firm. So landlords are cutting rents and offering such
sweeteners as free flat-screen televisions or several months of free
rent to retain or attract tenants. Some owners of condos will “cut their
throats to get some kind of rental income to cover part of their
expenses,” says Jack McCabe, a real estate consultant in Deerfield
Beach, Fla.
8. Can I get a tax credit if I buy a home now?
Under an expanded and extended program approved by Congress
earlier this month, tax credits are available to many people who buy
or sign a contract to buy a principal residence by April 30 and
complete the purchase by June 30. The tax credit is up to $8,000
for first-time home buyers and $6,500 for people who already have
owned a home for at least five consecutive years during the previous
eight years. The credit is available for individual taxpayers with annual
incomes of up to $145,000 or joint filers with incomes up to $245,000.
9. Can I get a mortgage on attractive terms?
Only if you have a good credit record, a moderate amount of debt in
relation to your income and the ability to fully document your income.
That last requirement is fairly easy for people who work for a salary
and have had the same employer for more than two years, but it can
be tough for self-employed people with incomes that vary substantially
from year to year.
A borrower with a strong credit score of 740 or higher (on the scale
of 300 to 850) and the ability to make a down payment of at least 20%
could get an interest rate of about 5% with no origination fees on a
30-year fixed-rate mortgage, says Lou Barnes, a mortgage banker
in Boulder, Colo. But if your credit score is 680, the rate jumps to
about 5.5%.
People who can’t make a down payment of at least 20% generally
are being funneled into loans insured by the Federal Housing
Administration. That means paying extra fees for the FHA insurance.
Borrowing costs are steeper at the high end of the housing market. For
so-called jumbo loans — those above $729,750 in areas with the highest
housing costs or $417,000 in places with the lowest costs — interest
rates on 30-year fixed-rate mortgages last week averaged 5.95%,
according to HSH Associates, a financial publisher.
10. Should I invest in foreclosed homes?
Probably not. A lot of investors chase these properties, and only the
most experienced know how to deal with all of the pitfalls. Homes
auctioned at trustee or sheriff sales are sold on an as-is basis, and
there is no provision for an inspection before you take ownership. If
after buying you find out that termites have been treating the floor
joists as an all-you-can-eat buffet, that is your problem. You must
pay for the full price within a day or two, so you need a lot of cash
or access to special short-term loans for investors that come with
interest rates of around 18%. This is a pursuit best left to people
with a lot of time, nerve, cash and knowledge of the local market.
* from the Wall Street Journal
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Banks To Prepay FDIC For Failures
The Federal Deposit Insurance Corp. will collect $45 billion from
the banking industry to cover the rising cost of bank failures, an
unprecedented assessment that reflects the agency’s projections
that the current round of failures will not peak until next year.
The FDIC’s board voted Thursday to require banks to pay at the
end of this year the amount they would owe the FDIC over the next
three years. The agency collects insurance premiums from all banks,
which it uses to reimburse depositors in failed banks.
In the past two years, the FDIC has seized 145 banks, compared
with only three in 2007. The casualties include four of the 10 largest
failed banks in U.S. history. The agency projects that the cost of all
failures resulting from the current crisis will reach $100 billion.
The FDIC has already spent or set aside the money to cover more
than half of those costs, but for the first time since the early 1990s,
the agency said the regular premium payments wouldn’t be enough
to cover the costs looming on the horizon.
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Beazer Homes CEO Could Face Civil Charges
ederal regulators have notified Beazer Homes USA Inc. that its top
executive could face civil charges over incentive compensation.
The notification comes more than a year after the Atlanta-based
homebuilder settled a Securities and Exchange Commission
investigation into its financial statements.
Beazer Homes said in a regulatory filing Monday that SEC staff
issued a so-called Wells notice to CEO Ian McCarthy. That means
the staff intends to recommend civil charges against McCarthy for
possible securities violations. Recipients of the notices can respond
to the allegations before the commission decides on any enforcement
action.
Beazer said McCarthy intends to respond to the notice, which is not
a formal allegation nor a finding of wrongdoing.
Beazer said the SEC staff recommended action against McCarthy
“to collect certain incentive compensation and other amounts allegedly
due” under the Sarbanes-Oxley Act of 2002. The company’s filing did
not disclose how much compensation is involved, or other details
about the disputed pay.
The company itself is not named in the notice. A Beazer representative
did not immediately return messages seeking comment. |
November 30th, 2009 | 
Author: 
