Federal Housing Administration to raise fees. Miami real Estate

Miami Florida Real Estate Services

WASHINGTON – Jan. 20, 2010 – The Federal Housing Administration is raising fees and tightening lending standards to shore up its strapped finances and avoid a taxpayer bailout.

The government agency has seen its losses rise with the foreclosure rate. Its reserves have sunk below the minimum level required by Congress. A healthy FHA is vital for the housing market because it insures roughly 30 percent of new loans, and is the largest backer of mortgages to first-time buyers.

The changes, which will go into effect in the first half of the year, “are among the most significant steps to address risk in the agency’s history,” FHA Commissioner David Stevens said in a prepared statement.

The FHA does not make loans, but rather offers insurance against default. Borrowers are willing to pay for the insurance because FHA loans only require down payments of 3.5 percent of the purchase price – and that didn’t change.

The new policies, to be announced Wednesday, are designed to bring more revenue into the agency, while at the same time keeping loans available.

Under the changes, homebuyers will:

• Pay an upfront mortgage insurance premium of 2.25 percent of the total loan amount, up from the current level of 1.75 percent. A borrower taking out a $200,000 mortgage would pay a $4,500 fee, for example, rather than the current fee of $3,500. Borrowers will still be able to wrap these fees into the total amount borrowed. FHA officials also plan to ask Congress to increase the maximum annual premium that FHA can charge.

• Need a credit score of at least 580 to qualify. Many FHA lenders already require a higher score, but there had been no standard requirement across the program. Borrowers with a score lower than 580 will need a down payment of at least 10 percent.

The changes come as borrowers with loans backed by the agency have increasingly been falling into default. More than 18 percent of FHA borrowers are at least one payment behind or in foreclosure, compared with 14 percent for all loans, according to the Mortgage Bankers Association.

Mortgage lenders “will find the new rules painful but necessary,” said Howard Glaser, a mortgage industry consultant and former housing official during the Clinton administration.

There also have been fears that unscrupulous operators have shifted their business to the FHA after the subprime business went bust. Last week, the agency served subpoenas on 15 mortgage companies with suspiciously high default rates for FHA loans, part of a broad crackdown on dubious lenders.

The agency has already taken action against several problem lenders. One of the nation’s biggest mortgage bankers, Taylor, Bean & Whitaker Mortgage Co. of Ocala, Fla., was banned from the FHA program in August and filed for Chapter 11 bankruptcy protection. Another mortgage company, Lend America, was kicked out in November.

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Only 8,405 in Fla. get mortgage modification.

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TALLAHASSEE, Fla. – Jan. 18, 2010 – Fewer than 3,000 South Floridians have a permanent loan modification under President Obama’s nearly year-old program to stem home foreclosures.

In the Treasure Coast, just 111 troubled borrowers have seen permanent relief from the $75 billion plan announced in February.

The dismal performance of the program marketed as a helping hand for the nation’s more than 3.3 million delinquent home loans was released Friday in a Treasury Department progress report.

Throughout Florida, which by every measure is one of the states hardest hit by the real estate crash, there are 8,405 permanent modifications. In Palm Beach, Broward and Miami-Dade counties combined there are 2,987 permanent modifications.

Another 96,703 Florida loans are on trial modifications.

The Making Homes Affordable program gives incentives to banks to modify loans in three basic ways; reducing interest rates to as low as 2 percent, increasing the life of the loan, and reducing the principal owed on the loan.

“You keep hearing about this wonderful program the government is doing but it’s not working,” said Joel Bienvenu, who owns a home west of Boca Raton and has been trying to get a loan modification through Wells Fargo since August. “I keep getting excuses that they are just overwhelmed.”

Nationwide, 66,465 permanent modifications have been approved, less than 2 percent of the total loans that are 60 or more days delinquent. Another 46,056 permanent modifications have been approved by the lender, but not yet by the borrower.

The median monthly decrease to mortgages that received permanent modifications was $516, according to the Treasury Department.

From the beginning of the program, homeowners have complained about having to send lenders the same paperwork multiple times, while banks say borrowers provide the wrong documents or fail to meet the requirements for the permanent modification.

Anthony DiMarco, executive vice president of government affairs for the Florida Bankers Association, said Friday that lenders have been on a learning curve, but are improving.

“I think the industry is working hard,” he said. “You can’t ramp up a program like this overnight.”

Fort Lauderdale real estate attorney and foreclosure mediator Shari Olefson said the more than 1.1 million trial modifications offered to borrowers nationwide shows lenders are making an effort.

The fact that just 66,465 have become permanent points to a fundamental problem with the program, she said.

“The program itself is a failure,” said Olefson, author of Foreclosure Nation, Mortgaging the American Dream. “It’s trying to put a square peg in a round hole.”

To qualify for a modification, a person’s monthly housing expenses must be more than 31 percent of gross monthly income. But you also must prove that you can pay for the modification.

Olefson believes high unemployment and a steep loss in housing equity is keeping the plan from working.

“The whole program was crafted before we correctly identified the problem,” she said.

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Foreclosures hitting more people with good credit. Miami Real Estate 800-819-5466

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The foreclosure crisis likely will persist well into next year as high unemployment pushes more people out of homes, pulls down housing prices and raises concerns about the broader economic recovery.

The latest evidence was a report Thursday that a rising proportion of fixed-rate home loans made to people with good credit are sinking into foreclosure. That’s a shift from last year, when riskier subprime loans drove the housing crisis.

The report from the Mortgage Bankers Association also found that 14 percent of homeowners with a mortgage were either behind on payments or in foreclosure at the end of September. It was a record-high figure for the ninth straight quarter.

The data suggest the housing market and the broader recovery will remain under pressure from the surge in home-loan defaults, especially as unemployment keeps rising. Lost jobs are the main reason homeowners are falling behind on their mortgages.

After three years of plunging prices, the housing market started to rebound this summer. That lifted hopes for the overall economy. But analysts say there are too many foreclosed homes that have yet to be dumped on the market and expect further price declines.

Among states, the worst damage is still concentrated in the states hardest hit from the start: Florida, Nevada, California and Arizona. Together, they accounted for 43 percent of new foreclosures.

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One in four mortgages in Florida were either past due or in foreclosure, the most in the U.S. Nevada was close behind at 23 percent.

“There’s no indication in this data that foreclosures are going to abate anytime soon,” said Mark Zandi, chief economist at Moody’s Economy.com, who projects that nationwide home prices will fall up to 10 percent before bottoming next fall.

Driven by rising unemployment, prime fixed-rate loans to borrowers with good credit accounted for nearly 33 percent of new foreclosures last quarter. That compares with 21 percent a year ago.

Many laid-off homeowners might be able to survive on their savings for a while, but “the longer the economic situation stays in place, the less likely they are to hold on,” said Jay Brinkmann, chief economist at the Mortgage Bankers Association.

In markets where foreclosures already are high and still rising, prices likely will remain soft. That will cause developers to keep their bulldozers idle and prevent the industry from making a big contribution to the economy’s recovery.

“Builders only start homes when they can make money,” said John Burns, an Irvine, Calif.-based real estate consultant. “In a lot of areas, until prices go back up, construction doesn’t make any sense.”

The crisis has struck people like Betty Wilson of San Diego. She was laid off a year ago from her job at an insurance company.

Since then, Wilson has managed to pay her $1,090 mortgage bill from collecting unemployment benefits, renting out a room and dipping into savings. But money is running low. She fears she won’t make her payment for December.

Wilson, 56, said she has tried to get her mortgage company, GMAC Mortgage, to lower her 6.25 percent interest rate or give her a temporary break from payments. Many mortgage companies will let a borrower skip up to six months of payments, though they require that the money be paid back eventually.

After The Associated Press inquired about her case, a GMAC spokeswoman said Thursday that the company would offer Wilson reduced payments for four months, “while we continue to review her financials for a permanent solution.”

After a typical recession, foreclosures peak about six months after the unemployment rate does. But the process could take longer this time, in part because loan-modification programs and new state laws have prolonged the process. Unemployment, now at 10.2 percent, isn’t expected to peak until next spring or summer.

Another unknown is the effectiveness of the Obama administration plan to attack the foreclosure crisis. As of last month, about 20 percent of eligible borrowers, or more than 650,000 people, had signed up. But most of those enrolled have been chosen for trials lasting up to five months.

About 4 million homeowners were either in foreclosure or at least three months behind on their mortgage payments as of September, according to the mortgage bankers group. Even if some of them manage to stay in their homes, the market is likely to absorb a wave of new foreclosures. Those properties are concentrated in states like Florida and other already beleaguered areas.

Subprime loans with adjustable rates have fallen to 16 percent of new foreclosures, from 35 percent a year earlier. Loans backed by the Federal Housing Administration also show rising signs of trouble. More than 18 percent of FHA borrowers are at least one payment behind or in foreclosure.

The Mortgage Bankers Association’s quarterly survey of 44.6 million loans is considered the most authoritative report on mortgage delinquencies. A separate report, issued monthly by foreclosure listing service RealtyTrac Inc., is based on courthouse filings.

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Forecast hopeful with first-time homebuyers leading the way. Miami Real Estate 800-819-5466

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Aided by the homebuyer tax credit, the outlook for housing and the economy appears headed for a sustainable recovery, according to the National Association of Realtors® (NAR).

“Given the success of the first-time buyer tax credit to date, and the need for qualified buyers to continue to absorb inventory that will include additional foreclosures over the coming year, we are hopeful about the impact of the expanded tax credit because it will stabilize home prices,” says Lawrence Yun, NAR chief economist. “In fact, the credit is working better than first projected – it now looks like we’ll have 2.3 to 2.4 million first-time buyers this year.”

The 2009 National Association of Realtors Profile of Home Buyers and Sellers shows that first-time buyers accounted for a record 47 percent share of home sales over the past year, up from 41 percent in the 2008 survey. The share has risen steadily since a cyclical low of 36 percent in 2006.

Existing-home sales are expected to total 5.01 million in 2009, a gain of 2.0 percent over last year, and then are forecast to rise 13.6 percent to 5.69 million in 2010. “A steady draw-down of inventory will help home values to turn positive in 2010, but risks such as unemployment remain in the economy,” Yun says.

New-home sales are projected at 397,000 this year, recovering to 549,000 in 2010. Housing starts, including multifamily units, should total 564,000 units this year but grow to 752,000 in 2010.

The 30-year fixed-rate mortgage will probably average 5.3 percent in the fourth quarter, rising gradually to 5.8 percent by the end of next year. NAR’s housing affordability index will set a record in 2009, averaging 30 percentage points higher than 2008. Affordability will decline from record highs next year but will remain at historically attractive levels for homebuyers.

“We’ve seen a steady downtrend in housing inventory for well over a year, and home prices appear to be in the early stages of stabilizing,” Yun says. “With expansion of the tax credit to additional buyers through the middle of next year, and no major unforeseen events impacting the economy, home prices should rise between 3 and 5 percent in 2010, but with wide geographic differences.”

He expects growth in the U.S. gross domestic product to be at a pace of 2.5 percent in the current quarter, with GDP up 2.8 percent in 2010.

The unemployment rate is close to peaking and is projected to ease to 9.5 percent by the end of next year.

“The size of the U.S. budget deficit is a concern going forward and carries the risk of higher inflation. At this point, that risk appears to be restrained,” Yun says. Inflation, as measured by the Consumer Price Index, is seen contracting 0.4 percent this year, then rising 1.6 percent in 2010. Inflation-adjusted disposable personal income is estimated to grow 0.4 percent this year and 1.2 percent next year.

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First-Time Home Buyer Tax Credit May Be Extended. Aventura Real Estate 800-819-5466

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The current $8,000 tax credit for first-time home buyers is scheduled to end on November 30, 2009. An amendment to expand the tax credit, sponsored by Sen. Johnny Isakson of Georgia, is expected to be attached to a Senate bill extending unemployment compensation.

The new version would allow all home buyers -- not just first-time buyers -- who earn less than $150,000 as individuals and $300,000 as married couples to receive a tax credit up to $8,000. The cost of the new version of the tax credit is nearly $17 billion. The new tax credit would run through June 30, 2010.

However, shortly before we went to press, Secretary of Housing and Urban Development Shaun Donovan told the Senate Banking Committee that the White House hadn't make a decision about extending the tax credit and was looking at the costs.

In the meantime, home buyers continue to ask a lot of questions about how to apply the current tax credit.

Q: My daughter, who is a U.S. citizen, has lived in a foreign country for the past 23 years. So one could say her primary residence is not in the U.S. She and her husband recently purchased a home in the U.S. that will be used as a rental property. Will she be able to claim the first time home buyer tax credit?

A: Unfortunately, the $8,000 first-time home buyer tax credit (in its current incarnation) is only available for individuals who have not owned a home during the last three years and intend on using the purchased home as a primary residence.

Since your daughter intends on using the home as a rental, it will not qualify for the tax credit.

By the way, although the $8,000 tax credit has not yet been extended beyond its current sunset date of November 30, the new version being proposed does not provide a tax credit for investment property. It is only for those who are buying a home to live in.

Q: The closing on my house will occur at the end of October or the beginning of November. I should be eligible for the $8,000 first-time home buyer tax credit.

But here's the wrinkle: I will be inheriting a house in November when my father's estate comes out of probate. Will that make me ineligible for the $8,000 first-time home buyer tax credit? I plan to live in the house that I am purchasing.

A: The rules relating to the $8,000 first-time home buyer tax credit require you to be a first-time home buyer by the date of the closing. If you close on your home at the end of October and at that time qualify for the tax credit, you shouldn't have to worry about whether you're inheriting a house the following month. You need only comply with the other requirements.

To qualify for the tax credit, you must not have owned a home during the three years prior to the closing. You must live in the home you buy for three years and must use it as your primary residence.

Your modified adjusted gross income may not exceed $75,000 for single people and $150,000 for married couples. Above those numbers, the tax credit phases out. (Your adjusted gross income is basically what you would see at the bottom of the first page of your federal income tax return.)

To get the full benefit of the $8,000 first-time home buyer tax credit, the sales price of the home must be at least $80,000. The tax credit equals 10 percent of the purchase price of the home, up to a maximum of $8,000.

Most importantly, you must close on the purchase of your new primary residence no later than November 30, 2009.

There are other rules that provide that the home must be located in the United States. Non-resident aliens are ineligible to obtain the $8,000 first-time home buyer tax credit, and you can't buy the home from a close relative.

In answer to your question, if you inherit the home after you close on your primary residence, you should still be entitled to keep the tax credit as long as you live in the home you purchased for at least three years.

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Rates on 30-year loans rise to 5.03 percent - Miami Real Estate 800-819-5466

Miami Beach - Rates for 30-year home loans climbed to 5.03 percent this week, the third consecutive weekly increase.

The average rate inched up from 5 percent a week earlier, mortgage company Freddie Mac said Thursday. The last time the average was higher was the week of September 24, when rates averaged 5.04 percent.

Rates had hovered below 5 percent for nearly a month until last week. They hit a record low of 4.78 percent in the spring, but are still attractive for people looking to buy a home or refinance.

The rates have advanced despite action by the government to prop up the housing market and stimulate the economy. The Federal Reserve has pumped $1.25 trillion on mortgage-backed securities in an effort to lower rates on mortgages and loosen credit.

Rates on 30-year mortgages traditionally track yields on long-term government debt.

Still, lenders have tightened their standards dramatically, so the best rates are available only to borrowers with solid credit and a 20 percent down payment.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day, frequently in line with long-term Treasury bonds.

The average rate on a 15-year fixed-rate mortgage rose to 4.46 percent from 4.43 percent recorded last week, according to Freddie Mac.

Rates on five-year, adjustable-rate mortgages averaged 4.42 percent, up from last week’s 4.4 percent. Rates on one-year, adjustable-rate mortgages rose to 4.57 percent from 4.54 percent.

The rates do not include add-on fees known as points. The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 points for 30-year loans. The fee averaged 0.6 points for 15-year, five-year and one-year loans.

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You didn’t really lose in Miami's housing free fall / Miami Real Estate 305-929-DEAN

Miami, Florida – Stan Smith has some news for longtime homeowners having a pity party over falling house prices in South Florida: New research shows that current home values are just about where they would have been if the real-estate bubble had never inflated and burst.

A long-term view of the market reveals that, even though prices rose and fell dramatically in recent years, they appear to have settled back into historic patterns, according to an analysis by Smith, a University of Central Florida finance professor.

“Most homeowners are within 6 percent of where they would have been had there not been a bubble. The people who have been here since before 2005, they should not have been hurt,” Smith said, though he added: “... A lot of people did buy in 2005 and 2006, and obviously they have been hurt significantly.”

For about a quarter-century, starting in the late 1970s, home prices in Metropolitan Orlando increased 4.7 percent a year on average, according to Smith’s analysis of data from a federal housing-price index. Then the bubble emerged, with prices rising 20 percent in 2005 and 32 percent the following year. Homeowners were elated about their fast-growing equity – at least until the bubble burst in mid-2007.

The sharp drop in prices since then – 22 percent from the 2007 high – may have left the impression that the bursting bubble set back even long-term homeowners for many years to come. Yet prices now are about where you would have expected them to be had the dramatic rise and fall never occurred.

Steve Shapiro, who is trying to sell his Lake Mary home, hadn’t really thought about it before but said it makes sense that the price he is asking for his home of 10 years tracks the area’s long-term pricing trends.

“I think I’m about where it should be with the price,” said the retiree, who has listed his house for $269,000 with Exit Realty Central agent Julie Elrod-Boyd – the same agent who helped him buy it in 1999 for $161,000. He estimated the house would have sold for more than $300,000 about 18 months ago, so the price has retreated 10 percent since then.

“It was nice to think it was worth so much a year and a half ago, but I felt like it was a little inflated,” he said. “All the homes were.”

Volusia County Property Appraiser Morgan Gilreath has obtained results similar to Smith’s in his county.

Gilreath recently plotted home prices from 1996 to the present and concluded they are not far below where they would have been without the bubble. The mid-point, or median, for home prices in Volusia in May was $124,900 – down about $20,000 from where they would have been if they had continued on their long-range trajectory rather than inflating and deflating in recent years, he said.

A year ago, the median in Volusia was about $50,000 above the historic trend line, he said; two years ago, it was flying about $100,000 above that line.

Gilreath said his analysis was not as thorough as Smith’s research at UCF, but both indicate the residential market is not likely to decline much further.

“The point that the charts are telling us is that we’re close to where we think the bottom is going to be,” he said. “The question is: When is it going to turn around? I have evidence that it is turning around here [in Volusia].”

Smith said prices in the region may continue to fall but are less likely to do so now that they are so near the long-term trend line – a “positive indicator” for coming months.

Les Simmonds, president of the Orlando Regional Realtor Association, said people generally measure their home’s current value against what it was worth a year ago – a short-term view of the market.” I feel strongly that, had we not had this bubble, that the median price of the properties would be a little better than they are now, because of the way they’ve been pushed down [in the post-bubble market] by ... [distressed] properties,” he said.

“I said to my wife last week that, when the market was really high, if we had sold then, we could have made four times what we paid for the house.” The problem, he added, is that most of the people who sold at the peak usually then bought near the top of the market. Shapiro said that, once he sells his Lake Mary house, he is ready to retire to a log cabin in north Georgia and forget about the whims of the real-estate market for a while.

The only thing that will rise and fall on his cabin, he said, will be the runners on his front-porch rocking chair.

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South Florida home sales spike in February. Miami Real Estate

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Prices are down as bargain-hunters, cash buyers snap up deals.

South Florida's existing home sales skyrocketed in February as irresistible prices and low mortgage rates continued to win out over the deepening economic gloom.

Broward County sales rose 39 percent last month, to 500 from 360 a year ago, the Florida Association of Realtors said Monday. The median price fell 30 percent, to $214,400 from $307,700, meaning houses now cost what they did in 2003.

The region's housing slump lingers in its fourth year, and mounting foreclosures and short sales are expected to depress prices through 2009 and most likely into 2010. While today's sellers grimace at the plummeting prices, more affordable homes ultimately will help the market rebound sometime next year, analysts say.

Despite rising unemployment and tight credit, year-over-year home sales in Broward have increased for eight consecutive months as investors and first-time buyers scoop up distressed properties. But weak job security has many potential buyers still sitting on the sidelines hoping prices keep falling and the overall economy improves.

The average 30-year fixed mortgage rate nationwide was 5.13 percent last month, down from 5.92 percent a year ago, according to mortgage giant Freddie Mac. Last week, average mortgage rates dropped below 5 percent and are expected to stay there.

"There's still a pool of people who have the financial wherewithal to buy a home, and now they're saying this is the right time," said Brad Hunter, a housing analyst based in West Palm Beach.

Broward's existing condominium sales also were brisk in February, rising 27 percent from a year ago. The median condo price was down 39 percent to $85,800.

The increased sales activity for homes and condos is making a dent in South Florida's bloated inventory of properties for sale.

Broward County has 31,921 available homes, townhouses and condos, down 14 percent from the end of November, according to a report Monday from Condo Vultures, a Bal Harbour-based real estate consulting firm.

"All-cash buyers are spooked by the stock market, and a lot of people are looking for peace of mind, and that's in bricks and mortar," said Peter Zalewski, principal at Condo Vultures.

Terry Story, a real estate agent for Coldwell Banker in South Florida, said she's running out of homes to sell. On a recent weekend, she had 27 showings, nearly triple her normal amount.

"If you're a serious seller, and you price it right, the home will sell," Story said.

But many sellers who bought recently say they can't price their properties to make a profit or break even because they paid peak prices themselves during the housing boom of 2000 to 2005.

While there are plenty of homes to choose from, some people don't want to buy now because of the declining job market and the belief that prices will fall even more in the months ahead, said Liliane Weinstein of Lang Realty in Broward and Palm Beach counties.

"Buyers are still very hesitant," she said.

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Cathy Kusuma and her husband are like many potential buyers: eager to find a home but not able to take the plunge until they sell their existing property.

The Kusumas have a sales contract on their Margate townhouse and expect to close in May. Last week, they put in an offer on a four-bedroom Parkland house, but it's a short sale and they don't know whether the bank will accept their bid.

"Circumstances have to line up just right," said Kusuma, 31.

Homeowners who have to sell before they can buy again often are left in limbo for months or even years.

A few weeks ago, Scott Kerr, 55, made an offer on a Deerfield Beach townhouse, but it was contingent on being able to sell his Delray Beach house.

He eventually had to pull out of the deal because he couldn't find a buyer. "I'm stuck," Kerr said.

In Palm Beach County, existing home sales rose 33 percent in February, while the median dropped 34 percent, to $228,100. Across Florida, sales rose 20 percent, and the median price fell 29 percent to $141,900. National new home sales figures will be released on Wednesday. Builders are reeling, with more than 100 nationwide, including the legendary Levitt and Sons of Fort Lauderdale, having folded in recent years.

Hollywood-based TOUSA Inc., which filed for bankruptcy protection early last year, said Monday it's suspending efforts to generate new sales and will focus on completing homes under construction, selling its remaining inventory of speculative homes and liquidating its land assets over time.

"The existing homes are being priced so aggressively that it's undercutting the builders quite a bit," said Mike Larson of Weiss Research in Jupiter.

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The Impact of Foreclosures on FICO Scores

The Impact of Foreclosures on FICO Scores

The Mortgage Banker Association recently estimated that 1 out of every 200 homes in the US will be foreclosed upon. With the increased number of foreclosures, come many questions about their impact on the FICO score.

There is no denying that a foreclosure is considered a very negative event by the FICO score. Many people believe that it is impossible to rebuild credit after such an event. However, if all other credit obligations remain in good standing, it is possible the FICO score could rebound in just 2 years. Just like any other negative item on the credit report, as time passes, the impact on the credit score will lessen.

Recently, several alternatives to foreclosures have become popular. Some of these include “short sales” and “deed-in-lieu of foreclosure”. It is important to know that as far as the FICO score is concerned, there is no difference between foreclosures and these other options. Each is considered and an account that was “not paid as agreed” will have the same negative impact on the score. However, the account status reported is ultimately the decision of the creditor.

It is important to remember that even though both foreclosure and bankruptcy are considered very negative items by the FICO score, a foreclosure can be isolated to a single account. Often bankruptcies involve multiple accounts that are classified as “not paid as agreed”, so the negative impact can be farther reaching. In most cases, it takes much longer to rebuild credit after a bankruptcy.

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NAR: Pending home sales surged 7.4% in August

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WASHINGTON – Pending home sales activity surged as buyers took advantage of low home prices and affordable interest rates, according to the National Association of Realtors® (NAR).

The Pending Home Sales Index (PHSI), a forward-looking indicator based on contracts signed in August, jumped 7.4 percent to 93.4 from an upwardly revised reading of 87.0 in July, and is 8.8 percent higher than August 2007 when it stood at 85.8. The index is at the highest level since June 2007 when it stood at 101.4.

Lawrence Yun, NAR chief economist, said home buyers were responding to improved affordability.

“What we’re seeing is the momentum of people taking advantage of low home prices, with pending home sales up strongly in California, Nevada, Arizona, Florida, Rhode Island and the Washington, D.C., region,” Yun says. “It’s unclear how much contract activity may be impacted by the credit disruptions on Wall Street, but we’re hopeful most of the increase will translate into closed existing-home sales.”

The PHSI in the West surged 18.4 percent to 109.5 in August and remains 37.8 percent above a year ago. In the Northeast the index jumped 8.4 percent to 79.8 and is 2.0 percent higher than August 2007. The index in the Midwest rose 3.6 percent to 84.5 in August and is 6.6 percent above a year ago. In the South, the index increased 2.3 percent to 96.0 but is 2.1 percent below August 2007.

Yun notes the unusual timing of contract activity in August. “Home buyers in July were hampered by overly stringent lending criteria in the months before the government takeover of Fannie and Freddie,” he says. “August shows some unleashing of pent-up demand before the credit crisis accelerated in September.”

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He cautioned that the sampling size for pending home sales is smaller than the track on existing-home sales, so there is more volatility in the forward-looking series. “We need to see just how much of this gain holds up,” Yun says.

NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., says despite all the turmoil in world financial markets, home mortgages are available. “Mortgages have been harder to find, and availability and terms vary depending on credit score and location, but Realtors can help buyers find reputable lenders while helping them navigate the transaction process,” he says. “The recently enacted economic stimulus package should help housing by gradually freeing the flow of credit.”

Yun now expects growth in the U.S. gross domestic product (GDP) to contract for two consecutive quarters, in the fourth quarter of this year and the first quarter of 2009, before expanding in latter part of 2009 as the housing market begins a steady improvement.

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Looking at middle-ground assumptions, existing-home sales are forecast at 5.04 million this year and 5.41 million in 2009. Following national declines of 5 to 8 percent in 2008, home prices are projected to increase 2 to 3 percent next year.

New-home sales should total around 503,000 this year and 471,000 in 2009. Housing starts, including multifamily units, are likely to fall 28.2 percent to 973,000 units this year, and come in around 843,000 in 2009 as builders continue to clear the accumulation in inventory.

The 30-year fixed-rate mortgage will probably average 6.1 percent in the fourth quarter and rise gradually to 6.6 percent by the end of 2009. NAR’s housing affordability index is expected to average 18 percentage points higher this year than in 2007.

The unemployment rate is projected to average 6.4 percent in the fourth quarter and then average 6.6 percent in 2009. Inflation, as measured by the Consumer Price Index, is estimated at 4.0 percent for 2008 and 2.0 percent next year. Inflation-adjusted disposable personal income is forecast to grow 1.7 percent this year and 1.0percent in 2009.

For more information regarding the above web Blog, please call Dean or Bonnie Isenberg at 305-936-2489 / 800-819-5466 or visit them on-line at A-Realtor.Com

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New program allows subprime mortgages to become a fixed-rate FHA. Miami Real Estate 305-936-2489

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WASHINGTON – Oct. 2, 2008 – A new program rolled out by HUD yesterday could help more homeowners avoid foreclosure. Under the program, the lender of an existing subprime mortgage forgives part of the debt as if it’s a short sale, and the balance of the mortgage is rolled into a fixed-rate FHA mortgage. Unlike earlier programs, however, the HOPE for Homeowners program is aimed more at lenders than homeowners.

“For families struggling to keep up with their mortgage payments, this program will be another resource to refinance into a loan they can afford,” says HUD Secretary Steve Preston. “FHA remains a safe and affordable alternative to the high-priced mortgage loans that threaten homeowners’ ability to retain their homes. We strongly encourage borrowers to work with their lenders to determine if HOPE for Homeowners is the right program for them.”

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The Economic and Housing Recovery Act of 2008 authorized the HOPE for Homeowners program. The HOPE for Homeowners Board of Directors was charged with establishing underwriting standards to ensure borrowers, after any write-down in principal, have a reasonable ability to repay their new FHA-insured mortgage.

The program began yesterday and ends Sept. 30, 2011. It’s available only to owner- occupants. In many cases, banks will have to write down the existing mortgage to 90 percent of the new appraised value of the home.

Borrower eligibility

Borrowers should contact their lender to determine eligibility. General requirements include:

• The home is their primary residence, and they have no ownership interest in any other residential property, such as second homes.
• Their existing mortgage was originated on or before Jan. 1, 2008, and they have made at least six payments.
• They are not able to pay their existing mortgage without help.
• As of March 2008, their total monthly mortgage payments due were more than 31 percent of their gross monthly income.
• They certify they have not been convicted of fraud in the past 10 years, intentionally defaulted on debts, and did not knowingly or willingly provide material false information to obtain their existing mortgage(s).

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How the program works

The Board expects homeowners will participate in the program primarily through their current lender. HOPE for Homeowners includes the following provisions:

• The loan amount may not exceed a maximum of $550,440.
• The new mortgage will be no more than 90 percent of the new appraised value including any financed upfront mortgage insurance premium.
• The upfront mortgage insurance premium is 3 percent and the annual mortgage insurance premium is 1.5 percent.
• The holders of existing mortgage liens must waive all prepayment penalties and late payment fees.
• The existing first mortgage must accept the proceeds of the HOPE for Homeowners loan as full settlement of all outstanding indebtedness.
• Existing subordinate lenders must release their outstanding mortgage liens.
• Standard FHA policy regarding closing costs applies.
• The borrower must agree to share with FHA both the equity created at the beginning of this new mortgage and any future appreciation in the value of the home.
• The borrower cannot take out a second mortgage for the first five years of the loan, except under certain circumstances for emergency repairs.

The costs to the homeowner include the upfront and annual insurance premiums, as well as a share of the equity created by the write-down associated with the HOPE for Homeowners mortgage and any future appreciation in the value of the home. If the home is sold or refinanced, the homeowner will share the equity with FHA on a sliding scale ranging from a 100 percent FHA share after the first year to a minimum of 50 percent after five years.

The lien holder that previously held the highest priority will receive payment up to a proportion of its original interest, not to exceed the amount of available appreciation. This type of delayed payoff will take place until all prior lien holders are satisfied or the amount of available appreciation is exhausted. All remaining appreciation is remitted to FHA.

Read more about HOPE for Homeowners at Hope For Home Owners

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For more information regarding the above web Blog, please call Dean or Bonnie Isenberg at 305-936-2489 / 800-819-5466 or visit them on-line at A-Realtor.Com

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Click Here To Request More Information About The Above Web Blog

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