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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Details of FHA’s $8K downpayment advance released

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WASHINGTON – The U.S. Department of Housing and Urban Development (HUD) released more details today about its program to help first-time homebuyers use a tax credit as part of a downpayment.

HUD announced the program on May 12 at the National Association of Realtors® Housing Summit. In the interim, HUD posted an announcement and then immediately took it down, leading to speculation that the program would be pulled. In response, HUD said the rules had simply not been finalized, and the original announcement had been posted in error.

“We’ve been eager for word from the federal government since the new FHA downpayment assistance plan was announced, and even more so after the program details were first published and then quickly pulled,” says John Sebree, FAR vice president of public policy. “Luckily, that turns out to be a minor setback and there will be a federal downpayment program to complement the $30 million we were successful in securing in the Florida budget.”

The most significant change involves the amount of downpayment required by qualified first-time homebuyers. FHA mortgages require a 3.5 percent downpayment, and the $8,000 tax credit cannot be used to override that requirement. Once the 3.5 percent downpayment requirement has been met, however, the tax credit can be applied to additional costs, including a higher downpayment, paying points to lower the mortgage rate, and/or closing costs. Lenders will treat the tax credit money as a second lien on the home until it’s paid back.

“Mortgage industry leaders have indicated that this type of product may not be immediately available to consumers,” says Sebree. Since lenders will oversee the tax credit loan, they must create internal programs to handle the process.

Lenders have some flexibility on payback requirements for the upfront loan of the tax credit, though HUD also created rules to protect homebuyers from onerous terms.

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Vulture funds may lift real-estate market in South Florida 305-936-2489

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MIAMI – For about a year, so-called vulture funds have circled South Florida’s besieged real-estate market, waiting for enough carnage to force deep discounts on large blocks of unsold condominiums. Some think last week’s meltdown on Wall Street may herald the arrival of that moment.

As many as 100 investment funds are shopping for South Florida real estate, hoping to buy extremely low during the current crisis. Their main target: condominium towers where developers and their lenders can’t sell enough units to pay off the loans used to build them.

“The bottom fishers, if you will, have been standing around the sidelines,” said Victor Lopez, a former Hyatt development executive now assembling commercial deals. ‘A lot of people out there are saying: ‘This is our time to get in.’”

If he’s right, it would be one of the clearest signs yet that South Florida’s beleaguered real-estate market had bottomed, bringing the region closer to a recovery. If vulture investors are buying, the view goes, it’s safer for others to start buying as well.

The funds come to the table with cash, but also a catch: a demand that the developers and banks accept a deep discount, typically between 40 and 50 cents on the dollar.

Despite all the attention these funds receive in the media and in real-estate circles, only one or two significant bulk condo deals have actually closed, according to several people involved in the market.

“Literally, a day doesn’t go by that I don’t get a call from potential investors,” said Ramiro Ortiz, president of Coral Gables-based BankUnited Financial. “The problem is that the price is 50 cents on the dollar. I’ve got enough clarity to know that’s not what I want to do.”

Real-estate analyst Michael Cannon sees the fund industry overstating the crisis facing developers and their lenders. So far, he is seeing enough condo buyers closing on their units to let most developers pay off their construction loans as well as some of the secondary loans needed to build the projects.

“Nobody is panicking,” Cannon said. “It’s not there.”

But after concluding the most dangerous week for the U.S. financial system since the Great Depression, fund managers think they are left with more leverage.

“Two very large hedge funds called me yesterday. Literally, they’re flying into Miami,” said Gregory Rumpel, a hotel broker at Jones Lang LaSalle, the day after Lehman Brothers filed for bankruptcy. “These guys are saying, ‘Well, that’s probably the shock to the market – with Lehman and all the other jitters out there – we need to see some stuff released.’”

Vulture in lipstick

One senior lending executive at a major South Florida bank that wanted to keep anonymous said his staff so far has refused offers from the so-called vulture funds. But he predicts that resistance won’t last much longer.

“The market conditions don’t seem to be improving. At some point, you’ve got to cut and run,” said the executive, who spoke on the condition that his name not be published. “That vulture is starting to look a little bit like it has some lipstick on it.”

Some think Wall Street’s grim news will prove a wake-up call to the fund managers themselves, prompting them to decide that the debacle has climaxed and that it’s time to deal.

“When you talk to most of these vulture-type investors, they all say they want to buy when there’s blood on the streets,” said Peter Zalewski, a partner at Condo Vultures, which brokers sales of distressed condominium towers. “This is really the sign they’ve been looking for.”

Turning point

An actual turning point wouldn’t reveal itself for months as the complicated deals, involving dozens of condominiums, get finalized.

“We’ve been active in this market for almost two years now,” said Matthew Martinez, whose Coral Gables firm, Pangea Select, is helping funds shop for South Florida real estate. “We’ve made about 32 offers. And we’re closing on the first one as we speak.”

Fluctuating currency markets add to the urgency for many of the funds with investment dollars from overseas. “Israel’s here in a big way,” said Adam Greenberg, managing director of BayBridge Real Estate Group, which is representing about a dozen funds.

Peter Wells wants to spend about $600 million in investor dollars and borrowed money on Miami-area real estate, but so far, he can’t find a motivated seller. He’s a partner in Condo Capital Solutions, a Denver-based fund that is looking for bulk deals in Florida and Arizona.

“We’re starting to see a few deals that are starting to make sense,” he said. Banks “are now starting to get a little bit more realistic.”


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NAR: Pending home sales indicate market stabilization - Miami Real Estate

Miami Real Estate / Miami Realtor

WASHINGTON – Pending home sales are hovering in a narrow range, another indication that a stabilization is occurring in the housing sector, according to the National Association of Realtors® (NAR).


The Pending Home Sales Index, based on contracts signed in October, slipped 1.7 percent to a reading of 107.2 and is 13.2 percent lower than October 2005. The index had trended up from a cyclical low of 105.6 in July, and a decline from year-ago levels is narrowing. In September, the index was 13.6 percent below a year earlier, while in August the decline was 14.0 percent.


David Lereah, NAR’s chief economist, says a fairly steady pace of home sales can be expected for the next two months. “It’s important to focus on where the housing market is now – it appears to be stabilizing, and comparisons with an unsustainable boom mask the fact that home sales remain historically high – they’ll stay that way through 2007,” he says. “In addition, a temporary correction in prices distracts from the fact that it is primarily the number of home sales that affects the economy, and the number for this year will be the third highest on record.”


The index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed and the transaction has not closed, but the sale usually is finalized within one or two months of signing.

Miami Real Estate

An index of 100 is equal to the average level of contract activity during 2001, the first year to be examined and the first of five consecutive record years for existing-home sales. There is a closer relationship between annual changes in the index and year-ago changes in sales performance than with month-to-month comparisons.


Regionally, the PHSI in the Midwest slipped 0.6 percent in October to 95.8 and was 15.4 percent below a year ago. The index in the South declined 1.7 percent to 122.9 and was 9.3 percent below October 2005. In the Northeast, the index eased 2.1 percent in October to 88.0 and was 13.5 percent lower than a year earlier. The index in the West fell 2.7 percent to 109.5 and was 17.4 percent below October 2005.

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