Affordable Mortgages lending limits scheduled to go down in October!

On September 30, the cost of a mortgage could rise significantly. If this happens, many of our clients run the risk of being priced out of the American Dream of home ownership. Even worse, this could hold back the housing recovery.

San Mateo County limit is currently $729,750 and it is scheduled to do down to $625,500.

We, and many fellow realtors, have taken action and written to our senators and representatives urging them to reconsider, but sadly it does not look like it will have an impact. Some banks have already reduced the limits to reflect the pending change.

FHA Announces Major Tightening of Loan Programs Coming Soon Act Now To Beat The Deadline!

Just a few weeks ago, the Federal Housing Administration announced that major changes to its loan programs are on their way. The FHA is very popular right now with close to one-half of Americans using this government program to finance the purchase of homes. These changes will make it harder for the average American to purchase going forward. Here is a summary of the changes:

• The cost of FHA mortgage insurance is going up significantly. The first increase will be for the "up-front" premium and this will be implemented with applications taken after April 5, 2010;
• Those with lower credit scores will be required to put 10% of the sales price down. Presently the requirement is for only a 3.5% down payment and the lower down payment requirement will continue for those with good credit histories. This requirement is to be implemented in early summer.
• Also to be implemented early summer, sellers will be restricted in the amount of closing costs they can pay. Typically FHA has been one of the most liberal programs in this regard as buyers could decrease the cash required through seller closing-cost assistance. Soon sellers will be able to offer assistance up to 3% of the purchase price, instead of the present 6%.

While we understand that the economy is causing many of these changes and they are important to make sure this important program remains sound, we also are concerned that everyone who wants to purchase can do so with as little barriers as possible. This means that if you are interested in purchasing a home, now is the time to act so that you can do so under the present guidelines.

FHA Announces Stricter Standards

It’s going to be harder to get a government-backed mortgage from now on. Looking to shore up its weakening finances, the Federal Housing Administration has announced stricter standards. The agency, which insured nearly a third of new mortgages in 2009, will increase the premium it charges for its mortgage insurance and require those with weaker credit scores to come up with larger downpayments.

The FHA will also reduce the amount of money a seller can provide a homebuyer for closing costs, as well as tighten its enforcement of lenders. "Striking the right balance between managing the FHA’s risk, continuing to provide access to underserved communities, and supporting the nation’s economic recovery is critically important," FHA Commissioner David Stevens said in a statement. Source: CNN/Money. Editors Note: These changes go into effect shortly and anyone who is thinking about purchasing a home can benefit by using the old rules if they act quickly.

Real estate investors are moving back into the market, according to a recent survey from Move.com. According to the Move.com survey, 12.1 percent of home buyers today plan to buy a home as an investment property, compared to 5.6 percent in March 2009. The survey found that 15.8 percent of those interested in investment property were men and 8.1 percent were women and 52.6 percent of the investment buyers were between ages 35 to 49. Of the 25.3 percent of buyers who are focusing on foreclosure properties, 42 percent regard the purchase they are considering an investment and don’t plan to live in the property themselves; 13.2 percent plan to rent out the property; 11.3 percent are going to fix up the property and resell it; and 17.4 percent plan to house a family member until the property can be sold profitably. Of the 9.8 percent of buyers who say that they plan to purchase and live in a property in the next two y ears, 5.4 percent plan to purchase in the next 12 months; 48.3 percent are first-time buyers; 52.8 percent are women, and 44.1 percent are men. Source: Move.com

Home prices are expected to grow modestly this year and sales will keep rising as the housing market continues to recover from the worst downturn since the Great Depression, the National Association of Realtors said in their latest report. Home resales are projected to total 5.7 million this year, up from an estimated 5 million last year. Prices will climb about 4 percent after a projected decline of 13 percent last year, according to Lawrence Yun, chief economist for the trade association. "Going into 2010, I anticipate that prices will also begin stabilizing or begin to modestly improve," Yun indicated at the association’s annual conference. "That should help ease buyers’ anxiety." Yun said. The housing market’s rebound has been aided by an aggressive federal intervention to lower mortgage rates and bring more buyers into the market. Home resales rose in the previous quarter to t he highest level in more than two years, something Yun said shows buyers are eager to get back into the market. A federal tax credit of up to $8,000 for first-time homebuyers has helped stoke sales last year. The buyers can claim the credit if they sign a contract by April 30 and close the deal by the end of June. Lawmakers also expanded the program to include a $6,500 credit for existing homeowners who have lived in their current residence for at least five years. Source: National Association of Realtors

Homeowner Affordability and Stability Plan Announced

The news is full of information on the new plan to help homeowners in trouble. Click here for a link to a great chart of who will qualify per a New York Times article.

We received the update below from the National Association of Realtors that discusses in detail the latest help planned for homeowners in trouble:

On February 18, 2009, President Obama announced his Homeowner Affordability and Stability Plan, designed to help up to 7-9 million families avoid foreclosure by restructuring or refinancing their mortgages. There are three main elements.

1. GSE Refinancing for Responsible Homeowners Suffering from Falling Home Prices.
Fannie Mae and Freddie Mac (the government sponsored enterprises, or GSEs) will refinance the mortgages for 4-5 million homeowners with loans owned or guaranteed by the GSEs. The streamlined refinancing program is designed to help borrowers with loan-to-value ratios above 80 percent up to 105 percent.

2. $75 Billion Homeowner Stability Initiative to Reach up to 3 to 4 Million At-Risk Homeowners
The goal of the 3-year Homeowner Stability Initiative is to reduce the monthly payment of homeowners to affordable levels using $75 billion from TARP and the GSEs. The program will be available for home owner-occupants “at risk of imminent default” even if they are current in making mortgage payments, as well as those already delinquent. It will only apply to mortgages at or below the GSE conforming loan limits.

Key elements of the plan:
· The lender world first be required to reduce rates, without assistance, so the monthly payment does not exceed 38 percent of borrower income (debt-to-income ratio of 38 percent). After that, federal assistance would be used to match, on a dollar-for-dollar basis, further reductions to bring the debt-to-income ratio down to 31 percent.
· After 5 years, the rate could increase gradually to the loan rate in effect at the time of the modification.
· Lenders may reduce monthly payments by reducing principal. Federal assistance would share the cost (up to the amount the lender would receive for reducing interest rates).
· As an incentive to loan servicers, they will receive $1,000 up front for each qualified loan modification. For borrowers who stay current on the modified loan, servicers will receive a monthly “pay for success” fees up to $1,000 a year for 3 years.
· As an incentive to borrowers, borrowers will receive a monthly reduction in their mortgage balance, up to $1,000 a year for 5 years.
· As an additional incentive to help borrowers avoid going into delinquency, servicers will receive $500 and mortgage holders will receive $1,500, if they modify at-risk mortgages before the borrower becomes delinquent.
· As an incentive for lenders to modify more mortgages, the Obama plan—together with the FDIC—has developed a partial guarantee initiative. The Treasury Department will establish an insurance fund of up to $10 billion to discourage lenders from foreclosing on mortgages, by limiting their lose if home prices decline more than expected. Mortgage holders of modified mortgages could receive a payment on each modified loan, linked to home price index declines.
· Treasury will establish uniform guidelines for loan modifications, working with bank regulators and the FDIC. All financial institutions receiving Financial Stability Plan assistance will have to agree to follow the guidance. The GSEs will use the guidance for their loans, and the government will work to apply them “when permissible and appropriate” to all federally owned or guaranteed loans, including Ginnie Mae, FHA, Treasury, Federal Reserve, FDIC, VA and Agriculture loans.
· The plan includes other elements, including:
o Strong oversight .
o “Allow Judicial Modification of Home Mortgages During Bankruptcy for

Borrowers Who Have Run Out of Options.” Only mortgages under GSE loan limits would qualify. Homeowners must first seek a loan modification. Legislation is needed. The plan also anticipates legislation to give FHA and VA authority to pay partial claims if there is a bankruptcy or voluntary loan modification so holders of FHA and VA guaranteed loans are not hurt.
o Funding for displaced renters and neighborhood stabilization.
o Improving Hope for Homeowners and other FHA programs.

3. Supporting Low Mortgage Rates by Strengthening Confidence in Fannie Mae and Freddie Mac
The Obama Plan beefs up the current support for the GSEs.
· The Treasury Department is doubling, from $100 billion to $200 billion for each GSE, its pledge to invest money to make sure that the GSEs maintain a positive net worth. This will further assure that the federal government is committed to maintaining the mission of the GSEs. In a statement issued today, Director Lockhart described this mission as “providing much-needed liquidity, stability and affordability to the housing market at this time.” He went on to say that doubling the commitment “should remove any possible concerns debt and mortgage-backed securities investors have about the strong commitment of the U.S. Government to support Fannie Mae and Freddie Mac.” He expects the increased commitment to help keep interest rates low, which will help both current and future homeowners. The additional $200 billion is from HERA in connection with the conservatorship, not from the Financial Stability Plan or TARP.
· Treasury will continue to buy GSE MBSs, as announced when the GSEs were placed into conservatorship.
· The GSEs will be able to increase their portfolios by $50 billion to $900 billion, and increase their outstanding debt.
· The Administration will work with the GSEs to support state housing finance agencies.