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HUD takes action to speed resale of foreclosed properties to new owners

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WASHINGTON – Jan. 18, 2010 – In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan announced a temporary policy that will expand access to FHA mortgage insurance to allow for a quicker resale of foreclosed properties. The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties or properties resold through private sales.

“As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers,” says Donovan. “FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization.”

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

“This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed,” Donovan says.

Acquiring, rehabilitating and reselling foreclosed properties to prospective homeowners often takes less than 90 days in today’s market; and FHA’s 90-day rule can adversely impact buyers if a seller is unwilling to hold a property 90 days thanks to holding costs and the risk of vandalism.

“FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties,” says FHA Commissioner David H. Stevens. “This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity.”

The waiver will take effect on Feb. 1, 2010, and be effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of “flipping,” the waiver is limited to those sales meeting the following general conditions:

• All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.

• In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.

• The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

• Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD’s website:
http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf

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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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Buying a Home in Time to Get Credit - Miami Real Estate 800-819-5466

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House hunting usually slows down this time of year, as people put their searches on hold during the holidays.

This winter could be different, however, thanks to the extension -- and expansion -- of the first-time home-buyer tax credit.

"We're going to see far more interest in the fourth quarter than we generally do because of the tax credit," says Heather Fernandez, vice president of Trulia.com, a real-estate search engine. Traffic surged on the site on Nov. 5, the day Congress approved the credit extension, she says.

The new law extends the tax credit for first-time home buyers and opens it up to some existing homeowners as well: The credit is now up to $8,000 for first-time buyers and up to $6,500 for repeat buyers.

All buyers must have a binding contract on a house in place on or before April 30. The purchase must be for a principal residence and must close on or before June 30.

To be considered a first-time home buyer, an individual must not have owned a home in the past three years. And to be eligible, existing homeowners need to have lived in the same principal residence for five consecutive years during the eight-year period that ends when the new home is purchased.

Income limits have risen as well. According to the Internal Revenue Service's Web site, www.irs.gov, the home-buyer tax credit phases out for individuals with modified adjusted gross incomes between $125,000 and $145,000, and between $225,000 and $245,000 for people filing joint returns.

The inclusion of move-up buyers might inspire homeowners to take action and list their house if they've been putting it off, says Carolyn Warren, a Seattle mortgage broker.

"If people love their home, it's not going to entice them to sell," Ms. Warren says. "If they've had it in the back of their minds and really would like to move up, it might push them into doing it sooner than later."

If you're thinking of purchasing a home, here are five tips:

Don't procrastinate
Start your house search now. Getting an early start will give you a better chance of finding the right house before the credit deadline.

When first-time buyers thought that the credit would expire Nov. 30, people scrambled to find properties in September and October, says Pat Lashinsky, chief executive of ZipRealty, a residential real-estate brokerage firm. In some cases, "there wasn't inventory that fit people's needs," he says. In some markets, including Phoenix, Chicago and parts of California, for example, properties had multiple bidders, Mr. Lashinsky adds.

Before you start house hunting, get preapproved for a mortgage, says Eddie Fadel, a Miami-based mortgage banker. And do a realistic assessment of what you can afford.

Buyers who have to sell an existing home should price it aggressively from the beginning to drum up interest and get a buyer as soon as possible, Ms. Fernandez says.

Don't count on another extension
The credit won't be available forever, Mr. Fadel says.

"This is a medication for the housing crisis," he says, "Once the patient -- which is the housing market -- is cured, there will be no medication needed."

Be mindful of interest rates
Interest rates are low right now, but will likely rise next year, Ms. Warren says. Higher rates will affect your monthly mortgage payments, thus the affordability of the house you are buying.

"It's pretty universally accepted that rates will be higher next year," she says. "What is unknown is how fast and by how much."

Average rates on 30-year fixed-rate mortgages have been hovering around 5%. But when the Federal Reserve stops buying large amounts of mortgage-backed securities next year, interest rates could rise, Ms. Warren points out. The Fed plans to end its purchase program in March.

Communicate with your lender
Make sure you're speaking with your lender regularly to avoid any delays. If the lender asks for any additional documentation, turn it in as soon as possible, says Doug Heddings, a New York-based real-estate agent with Charles Rutenberg Realty.

And think twice before pursuing a short sale. That's where someone sells a home for less than what he or she owes on a mortgage, with permission of the lender. The process can be lengthy and unpredictable because the homeowner's lender has to approve any deal, Ms. Warren says, and it can get complicated when there is a second mortgage associated with the property.

Don't take shortcuts
Don't forgo any of the steps you would normally take just to make the tax-credit deadline. That means making sure the house is a good fit and is in the right location and getting a home inspection, Mr. Lashinsky says. Skipping steps could cost you in the long run.

"Don't let the tax credit get you to make a decision to buy a house that you wouldn't otherwise want to buy," he says. "Don't shortcut the process to get the tax credit."

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Tax credit extension passes House and Senate. Florida Real Estate

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WASHINGTON – Nov. 5, 2009 – The $8,000, first-time homebuyer tax credit has not yet been extended beyond its Nov. 30 end date, but it’s very close to gaining a longer life.

The extension was added as an amendment to an existing bill, HR 3548, that extends unemployment benefits. The U.S. Senate passed that bill on Wednesday and, after debate, the U.S. House passed HR 3548 this afternoon. It now needs only President Obama’s signature to become law, and the White House has indicated it will sign it, perhaps as early as tomorrow.

Until the president signs the bill, however, it is not law.

In addition to extending the tax credit for first-time homebuyers under the current rules, the bill adds a smaller tax credit for move-up homebuyers who have lived in the house for five of the past seven years. The bill also increases the income limits of homebuyers from $75,000 (single) to $125,000; and from $150,000 (married) to $225,000.

Florida downpayment assistance

After the president signs the bill and extends the tax credit, the Florida Homebuyer Opportunity Program – a downpayment and closing costs assistance program relating to the federal tax credit –automatically gets extended too. The state still has about $28 million available for homebuyers. The money is essentially a loan to first-time buyers; they receive it upfront, use it for a downpayment or other costs, and pay it back once they get their federal refund.

For more information on the Florida Homebuyer Opportunity Program, visit the Homebuyer Center on floridarealtors.org: http://www.floridarealtors.org/AboutFar/homebuyercenter/index.cfm

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

Aventura Real Estate - Miami Florida -

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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