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Proposed Changes to FHA Lending Guidlines

Testifying before the Housing Financial Services Committee yesterday, Secretary of Housing and Urban Development (HUD) Shaun Donovan announced possible policy changes for Federal Housing Administration’s (FHA) borrowers.Rising defaults on FHA loans have led to the FHA’s cash reserves falling below federally mandated levels. FHA officials hope that policy changes will ensure borrowers have a stronger equity position and are less likely to default.Proposed changes include:· Raising the minimum credit scores requirements: Currently borrowers with FICO scores as low as 500 may qualify for an FHA-insured loan. The new minimum credit score has yet to be determined.· Increasing down payment requirements: FHA borrowers currently can put down as little as 3.5 percent. A proposed change would raise that amount to a minimum of 5 percent.· Limiting the amount sellers can provide as concessions: The agency is considering lowering the maximum permissible level to 3 percent from its current 6 percent limit.· Raising up-front insurance premiums: Agency staff is reviewing whether to increase the monthly insurance premiums charged to borrowers, which come on top of insurance paid up front. The current up-front premium is set at 1.75 percent of the value of the loan. The FHA may decide to increase that premium. The amount has yet to be determined.According to Donovan, the rules will not be finalized until the FHA determines how to craft them in a way that weeds out the most problematic borrowers while ensuring that qualified borrowers will not be inadvertently shut out, thereby derailing the housing market's recovery.Fore more information about the changes to FHA borrowers, please visit the following:
Wall Street Journal: FHA Considers Ways to Boost Its Reserves
Washington Post: HUD chief defends efforts to aid borrowers
Los Angeles Times: Home buyers will have to lay out more cash for an FHA mortgage

Home sales contracts rise in October

Hello!

I thought this fresh article by Les Christie, CNNMoney.com staff writer is well worth sharing:

National Association of Realtors index spikes 32% as buyers take advantage of first-time homebuyer tax credit.

NEW YORK (CNNMoney.com) -- Americans are inking a lot of deals to buy homes.
In October the National Association of Realtors recorded an unprecedented ninth consecutive month of increases in the number of signed contracts.
Although these are not closed sales, and some deals can fall through, signed contracts are a good indicator of where the housing market is headed.
Between September and October NAR's Pending Home Sales Index rose 3.7% to 114.1 from 110 in October. But the index is 31.8% higher than a year ago, when it was 86.6. That's the biggest year-over-year gain in the history of the index.
The PHSI is also at its highest level since March 2006, and the rise confounded expert expectations. A panel of industry analysts put together by Briefing.com had forecast a 1% drop in new contracts.
NAR's chief economist, Lawrence Yun, gives much of the credit for increased sales to the homebuyer's tax credit, which first-time homebuyers could claim to reduce their taxes by up to $8,000.
"The tax credit is helping unleash a pent-up demand from a large pool of financially qualified renters, much more than borrowing sales from the future," Yun said in a prepared statement.
The credit had been due to lapse on Dec. 1, so many October buyers may have acted to get in under the wire.
However, the credit has been extended through the middle of 2010 and expanded to include many move-up buyers. The housing industry hopes that will keep sales perking until the economy picks up and markets return to a more normal condition.
In a related story, the Census Bureau reported that private residential construction spending surged 3.9% during October.
Yun cautioned, however, that housing market indicators, such as pending sales, may weaken over the next few months.
"The expanded tax credit has only been available for the past three weeks, but the time between when buyers start looking at homes until they close on a sale can take anywhere from three to five months," he said.
"Given the lag time, we could see a temporary decline in closed existing home sales from December until early spring when we get another surge," he added. "But the weak job market remains a major concern and could slow the recovery process."
The good news is that number of homes on the market has declined, removing some of the bloat that has depressed prices. There is now a seven month supply of homes on the market at the current rate of sale. which is down from 10.2 months a year ago. Yun predicted that housing conditions could return to near normal and home prices firm up by mid-2010.
"That would mean broad wealth stabilization for the vast number of middle-class families," he said.

Extension of Conforming Loan Limits Through 2010

LOS ANGELES--(BUSINESS WIRE)--The U.S. Congress late yesterday passed a congressional resolution extending through 2010 the current conforming loan limits of $417,000 for most areas in the U.S. and $729,750 for high-cost areas, including many in California. President Obama is expected to sign the resolution today or tomorrow as part of a broader piece of budgetary legislation that will prevent a government shutdown.
The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) and the NATIONAL ASSOCIATION OF REALTORS® (NAR) have long advocated making permanent higher conforming loan limits. As a result of C.A.R.’s and NAR’s efforts, a provision of the Housing and Economic Recovery Act of 2008 included temporarily raising the conforming loan limits from $625,500 in high-cost areas to $729,750 and extending the limits through 2009. Yesterday’s actions effectively extend the higher conforming loan limits for Fannie, Freddie, and FHA loans through 2010.
“There is no doubt that higher loan limits and the federal tax credit for first-time home buyers have helped stabilize California’s housing market over the last year,” said C.A.R. President James Liptak. “C.A.R. applauds our congressional representatives for their actions to extend the higher loan limits through 2010. They now should focus on making higher loan limits permanent.”
The conforming loan limit determines the maximum size of a mortgage that Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac can buy or “guarantee.” Non-conforming or “jumbo loans” typically carry higher mortgage interest rates than conforming loans, increasing monthly payments and hampering the ability of families in California to purchase homes by making them less affordable.

Quarterly Newsletter on its way!

Hello friends!

My Quarterly Newsletter is on it's way this week. Be on the lookout!

Senators likely to extend tax credit to end of April 2010

Many of the top Democrats and Republicans expressed support this week to extend or expand the soon-to-expire buyer tax credit.



Most agreed to extend the $8,000 first time home buyer tax credit. Additionally, they plan to expand a $6,500 tax credit to home owners who have been in their home for at least 5 years if they purchase a new primary residence. This is very big news for buyers who thought that ship sailed!



They will also consider making the tax credit available for individuals making up to $125,000/yr and couples making $250,000/yr. This is up from $75,000 and $150,000 respectively. Sweet!

The extension and improvement of the tax credit has a ton of support but still needs to be signed. It's not a done deal yet!!

Baton down the hatches!

The National Weather Service has issued this special statement for Marin county. Be sure to clean out those gutters, cover your patio furniture and do other winter preparations around the house - early!
... HEAVY RAIN AND POTENTIALLY HIGH WINDS EXPECTED TO ACCOMPANY A SIGNIFICANT STORM EXPECTED TO HIT LATE MONDAY INTO EARLY WEDNESDAY OF NEXT WEEK...
A POTENT STORM SYSTEM... ESPECIALLY FOR OCTOBER... WILL MOVE INTO CENTRAL AND NORTHERN CALIFORNIA BEGINNING LATE MONDAY AND CONTINUING THROUGH WEDNESDAY MORNING. THIS WILL BE A VERY DRAMATIC CHANGE FROM THE TYPICAL LATE SUMMER PATTERN THE AREA HAS BEEN EXPERIENCING. THE ORIGINS OF THIS STORM STEM FROM A WESTERN PACIFIC TYPHOON NAMED MELOR THAT HIT JAPAN A FEW DAYS AGO.

Congress might extend frist-time buyer rebate

The real estate industry in California and across the nation is lobbying Congress to extend the credit through next summer. Members of the House and Senate have proposed more than 20 bills to extend and/or expand the credit.

U.S. home prices rise 0.3 percent in July

U.S. home prices rose slightly in July from a month earlier, according to a government index, further evidence the housing market is stabilizing. Lets hope it continues. Crystal ball anyone?

Real Estate Finance Update

The proportion of first-time buyers was high compared to levels seen in the past few years, but whether the concentration of first-time buyers in the current cycle can be maintained depends in part on underwriting standards. The ability of first timers to capitalize on lower home prices has been hampered by tighter lending standards, which heighten the difficulty for a typical first-time buying household to qualify for a loan.

Level of Difficulty in Obtaining Financing

Tighter underwriting standards led to more scrutiny in the process of mortgage application approval. Home buyers experienced a high level of difficulty in obtaining financing for the homes they bought. On a scale of “1” to “10”, with “1” being “very easy” to obtain financing and “10” being “very difficult”, home buyers on average had a level of difficulty in obtaining finance of 8.1. Twenty-seven percent of all buyers responded with a “10”, and 31 percent responded with a “9”. Only 13 percent responded with a “5” or below.

• Home buyers who bought an REO or a bank-owned property experienced the highest level of difficulty in obtaining financing. They rated the level of difficulty an 8.9, compared to a 7.7 for home buyers with a regular market sales, and a 7.6 for short sale home buyers.
• Repeat buyers reported the average rate of difficulty at 8.3, as compared to 7.9 for first-time buyers.

Home Buyer Tax Credit