I have long wondered why banks reject perfectly reasonable offers on houses that need a short sale. The banks take months to respond to an offer on a house, they refuse to do repairs required to make the sale happen, and they cut the agents' commissions at the last minute. They really seem to prefer to foreclose on the house, rather than work out a home loan modification with the underwater home owner, or accept a short sale offer at market value. When the house goes to foreclosure, it typically sells for far less that it would have by a short sale. What gives? How can the banks stay in business by willfully choosing to foreclose, and thereby receiving much less than they need to?
The guys at Think Big Work Small think they have it figured out. The FDIC seized the assets (bundled mortgages) of some inept mortgage lenders, and then sold the assets to other lenders at a deep discount. Then when the new lenders foreclose, FDIC compensates the new lenders for their losses, but not for their actual losses, but for the loss the lender would have incurred if the new lender lost the difference between the original mortgage amount and the foreclosure price. Of course, the new lender is not really losing that amount, because they bought the mortgages for less than was owed!
If this scenario is true, the FDIC is using tax-payer dollars (or I should say, increasing our deficient and borrowing against future tax-payer dollars) to enrich the lucky, well-connected banks that bought the assets of defunct banks. All these unnecessary foreclosures drive down the values of the neighboring properties, making it impossible for neighbors to refinance or to sell at a fair price. As long as the FDIC pays banks to foreclose rather than do a short sell or a loan modification, market value of all houses will be unjustly dragged down by the value of the foreclosed houses.
Are you horrified yet?
Thursday, August 12, 2010
Monday, August 9, 2010
Go Solar with No Installation Cost
The amazingly fabulous Center for Biological Diversity (CBD) has found a unique and affordable new way for you to lease solar panels for your home, and at the same time raise $500 for the CBD. If you get the panels installed, please let me know how it worked out for you. Here's the plan:
Sungevity, a home-solar installer serving California, Arizona and Colorado, puts up solar panels on your house for free when you sign up to lease them.
You pay Sungevity on a monthly basis for your home-solar lease, usually the same or less than what your pre-solar electric bill used to be.
Sungevity pays the CBD a $500 referral fee for sending you their way.
Sungevity pays you an additional $500 cash bonus for joining the solar lease program, plus $1,000 credit toward your future lease payments.
In the end, you could end up having home-solar power for nothing more than you were paying in electricity bills before, plus $500 cash back and the chance to earn a generous donation for the Center for Biological Diversity. Not to mention the fact that the atmosphere will be spared roughly 8.24 metric tons of CO2 a year (roughly what you'll conserve by using solar on your home). It's a win-win-win situation.
To take advantage of this offer, please follow the steps below:
Go to the Sungevity home page to request an iQuote: www.sungevity.com
After you submit your request, you'll be taken to a page that asks you where you heard about Sungevity. Enter the following referral code: CBD.
Within 48 hours, Sungevity will send you an iQuote with your estimated monthly lease payment and savings. You then decide whether to enter a lease agreement.
If you are excited about this promotion and about raising funds for the Center's work, please spread the word among your friends and colleagues who live in Arizona.
This offer is good through the end of 2010.
If you have any questions about this program, please contact Brian Somers at Sungevity (bsomers@sungevity.com).
Sungevity, a home-solar installer serving California, Arizona and Colorado, puts up solar panels on your house for free when you sign up to lease them.
You pay Sungevity on a monthly basis for your home-solar lease, usually the same or less than what your pre-solar electric bill used to be.
Sungevity pays the CBD a $500 referral fee for sending you their way.
Sungevity pays you an additional $500 cash bonus for joining the solar lease program, plus $1,000 credit toward your future lease payments.
In the end, you could end up having home-solar power for nothing more than you were paying in electricity bills before, plus $500 cash back and the chance to earn a generous donation for the Center for Biological Diversity. Not to mention the fact that the atmosphere will be spared roughly 8.24 metric tons of CO2 a year (roughly what you'll conserve by using solar on your home). It's a win-win-win situation.
To take advantage of this offer, please follow the steps below:
Go to the Sungevity home page to request an iQuote: www.sungevity.com
After you submit your request, you'll be taken to a page that asks you where you heard about Sungevity. Enter the following referral code: CBD.
Within 48 hours, Sungevity will send you an iQuote with your estimated monthly lease payment and savings. You then decide whether to enter a lease agreement.
If you are excited about this promotion and about raising funds for the Center's work, please spread the word among your friends and colleagues who live in Arizona.
This offer is good through the end of 2010.
If you have any questions about this program, please contact Brian Somers at Sungevity (bsomers@sungevity.com).
Saturday, August 7, 2010
FHA Changes Coming
FHA, the federal agency that insures loans for millions of homeowners who have limited down payment, needs a cash infusion. FHA's reserves have been below the required level for several months, and they must figure out how to increase their reserves so they can continuing insuring loans. In July, 36% of the home buyers in Tucson who financed their purchase used FHA loans.
On October 4, 2010, FHA will be changing the Mortgage Insurance Premiums that they charge to borrowers using FHA financing. The Up-Front Mortgage Insurance Premium (UFMIP), which is added to the buyer's loan amount, will decrease from from 2.25% to 1.0%. On a $100,000 purchase, at the current 4.5% (!) interest rate, this will reduce the monthly payment by $6.11. So far so good.
The problem for home buyers is that the Monthly Mortgage Insurance Premium (MMIP) will increase from 0.55% to 0.80% or 0.90% annually. The exact amount hasn't been determined yet. If the MMIP goes to 0.9% annually, the net effect of the UFMIP and MMIP changes will be this: using FHA financing at current interest rates on a $100,000 house will cost $21.77 per month more.
On October 4, 2010, FHA will be changing the Mortgage Insurance Premiums that they charge to borrowers using FHA financing. The Up-Front Mortgage Insurance Premium (UFMIP), which is added to the buyer's loan amount, will decrease from from 2.25% to 1.0%. On a $100,000 purchase, at the current 4.5% (!) interest rate, this will reduce the monthly payment by $6.11. So far so good.
The problem for home buyers is that the Monthly Mortgage Insurance Premium (MMIP) will increase from 0.55% to 0.80% or 0.90% annually. The exact amount hasn't been determined yet. If the MMIP goes to 0.9% annually, the net effect of the UFMIP and MMIP changes will be this: using FHA financing at current interest rates on a $100,000 house will cost $21.77 per month more.
July Residential Sales Statistics
The Tucson Multiple Listing Service has released Residential Sale Statistics for July
While the average and median sale prices held steady from June to July, the number of sold units dropped 32% in that one month. Most buyers had to complete their home purchases by June 30 to qualify for the $8,000 tax credit. In July, we saw not only the usual lack of interest in summer home buying, but also the abrupt loss of one huge government subsidy for home buying.
FHA accounted for 36% of the financed sales. Changes are coming in September that will make it harder for buyers to use FHA financing.
Amazingly, 27% of the sales were cash. Many of the foreclosed houses are too damaged or neglected to qualify for financing. Investors are buying these sorry wrecks at incredibly low prices, renovating them, and reselling a few months later for twice as much. While the investor purchases drag down the values of neighboring houses, the resale of renovated houses to homeowners pulls the values up, and helps stabilize neighborhoods.
While the average and median sale prices held steady from June to July, the number of sold units dropped 32% in that one month. Most buyers had to complete their home purchases by June 30 to qualify for the $8,000 tax credit. In July, we saw not only the usual lack of interest in summer home buying, but also the abrupt loss of one huge government subsidy for home buying.
FHA accounted for 36% of the financed sales. Changes are coming in September that will make it harder for buyers to use FHA financing.
Amazingly, 27% of the sales were cash. Many of the foreclosed houses are too damaged or neglected to qualify for financing. Investors are buying these sorry wrecks at incredibly low prices, renovating them, and reselling a few months later for twice as much. While the investor purchases drag down the values of neighboring houses, the resale of renovated houses to homeowners pulls the values up, and helps stabilize neighborhoods.
Wednesday, August 4, 2010
Seller-Funded Down Payment Assistance Program
The home buyer tax credit program is history, and no one is really sure if the $12.6 billion investment was worth it. I myself have not seen any decline in home buying, probably because of the incredibly low 4.5% fixed mortgage rates combined with house values that in some cases are half what they were three years ago.
These guys at ThinkBigWorkSmall make a good point. Just a few years ago, we had programs that allowed sellers to contribute to the buyer's down payment. The down payment had to be laundered through a non-profit that skimmed some of the money for handling the paper work, but a lot of houses were sold to people who had no savings.
HUD decided that because the default rate on these loans was considerably higher than average, they had to put a stop to seller-funded down payment assistance programs. They concluded that when people don't have much "skin in the game", meaning their own savings invested in a houses, they are more likely to walk away from the house when they get into financial trouble.
But is this the reason for high rate of defaults on these loans? Maybe partially, but HUD needs to remember that many of these loans were made to people with no income and bad credit. Additionally, the unemployment rate has soared, and the glut of foreclosures had depresed property values, making houses impossible to sell or refinance. The defaults should surprise no one.
Almost immediately after the seller-funded down payment programs were eliminated, HUD came up with a new idea: $6,500 to $8,000 tax credits for home buyers. The problem with this is that instead of the home buyer having their skin in the game, now they have the tax payers' skin in the game. $12.6 billion of it. This doesn't seem like an improvement to me.
HR 600 is a bill that will restore seller-funded down payment assistance programs. These programs could help keep the housing recovery chugging along, and they don't cost tax payers a dime.
For the most part, lenders are no longer making loans to people who have no business buying a house. In fact, lenders have swung so far in the other direction, that I am now having trouble getting loans closed for people with perfect credit, savings and secure jobs. If the down payment assistance program could be used to help people who are actually qualified to buy houses, we would all benefit.
These guys at ThinkBigWorkSmall make a good point. Just a few years ago, we had programs that allowed sellers to contribute to the buyer's down payment. The down payment had to be laundered through a non-profit that skimmed some of the money for handling the paper work, but a lot of houses were sold to people who had no savings.
HUD decided that because the default rate on these loans was considerably higher than average, they had to put a stop to seller-funded down payment assistance programs. They concluded that when people don't have much "skin in the game", meaning their own savings invested in a houses, they are more likely to walk away from the house when they get into financial trouble.
But is this the reason for high rate of defaults on these loans? Maybe partially, but HUD needs to remember that many of these loans were made to people with no income and bad credit. Additionally, the unemployment rate has soared, and the glut of foreclosures had depresed property values, making houses impossible to sell or refinance. The defaults should surprise no one.
Almost immediately after the seller-funded down payment programs were eliminated, HUD came up with a new idea: $6,500 to $8,000 tax credits for home buyers. The problem with this is that instead of the home buyer having their skin in the game, now they have the tax payers' skin in the game. $12.6 billion of it. This doesn't seem like an improvement to me.
HR 600 is a bill that will restore seller-funded down payment assistance programs. These programs could help keep the housing recovery chugging along, and they don't cost tax payers a dime.
For the most part, lenders are no longer making loans to people who have no business buying a house. In fact, lenders have swung so far in the other direction, that I am now having trouble getting loans closed for people with perfect credit, savings and secure jobs. If the down payment assistance program could be used to help people who are actually qualified to buy houses, we would all benefit.
Sunday, July 18, 2010
June Residential Sales Statistics
The Tucson Association of Realtors has published the Residential Sales Statistics for June. Average and median sale prices are down 9.4% since June last year. From May to June this year, average price declined 2.9% to $189,231 and median price declined 1% to $149,450. This is the first time the median has been below $150,000 since January 2004.
Once again, 87% of the sales were below $300,000. With 5,979 listings under $300,000 and 1,015 sales under $300,000, we have a 5.9 month supply of listings in that range. This is below the six month supply that is considered a balanced market, so the advantage is tipped slightly toward the seller for an appropriately-priced house in this price range. However, sellers are being asked to contribute to buyers' closing costs and make repairs.
Overall, we had 7,997 listings and 1,170 sales in June, for a 6.8 month supply of listings in all price ranges.
Once again, 87% of the sales were below $300,000. With 5,979 listings under $300,000 and 1,015 sales under $300,000, we have a 5.9 month supply of listings in that range. This is below the six month supply that is considered a balanced market, so the advantage is tipped slightly toward the seller for an appropriately-priced house in this price range. However, sellers are being asked to contribute to buyers' closing costs and make repairs.
Overall, we had 7,997 listings and 1,170 sales in June, for a 6.8 month supply of listings in all price ranges.
Friday, July 16, 2010
Your Opinion Needed on FHA Plans
FHA temporarily increased the amount that the seller can contribute to the buyer's closing costs from 3% of the sale price to 6%. Now they are thinking of reducing it back to 3%.
This is another example of the government getting in the way of a housing recovery. FHA is looking for opinions on this proposed change. Remember, as the government makes home sales more difficult, more houses will stay on the market and home values have to drop. Even if you aren't buying or selling in the immediate future, vacant houses affect you because of 1) the loss of property tax revenue to the city and county, resulting in reduced services, 2) the blight of vacant houses and 3) the reduction in your home's value, potentially making refinancing impossible.
Make your comments here.
This is another example of the government getting in the way of a housing recovery. FHA is looking for opinions on this proposed change. Remember, as the government makes home sales more difficult, more houses will stay on the market and home values have to drop. Even if you aren't buying or selling in the immediate future, vacant houses affect you because of 1) the loss of property tax revenue to the city and county, resulting in reduced services, 2) the blight of vacant houses and 3) the reduction in your home's value, potentially making refinancing impossible.
Make your comments here.
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