By Stacey Moncrieff

When they're facing foreclosure, what should home owners do?

A Washington Post story we picked up for our daily news e-mail last week showed that a sizeable number do nothing. According to the story, 53 percent of loans backed by Freddie Mac that went into foreclosure involved borrowers who could not be reached.

Naturally, opportunists are springing up everywhere. On Feb. 29, The New York Times ran a story by John Leland, “Facing Default, Some Walk Out on New Homes.” It mentioned a new San Diego company that helps owners walk away from unaffordable mortgages. The company is aptly called You Walk Away.

I encourage my kids to confront issues with friends and teachers head on, and I think borrowers should do the same with their lenders. That's why it was refreshing today to see a Webinar invitation at Facebook from RealTown blogger Frances Flynn Thorsen, e-PRO, SRS, that calls on real estate practitioners to help Americans keep their homes. (You have to be registered with Facebook to view the invitation.)

In comments, Thorsen says she'll post the recorded Webinar online and follow up with home owners who've avoided foreclosure. The Webinar is free and it takes place March 6 from 4 to 5 p.m. Eastern time. I'll be there.

Posted on February 29 at 05:04 PM | Permanent Link | Add a Comment (0)

By Robert Freedman

It's true that the days when lenders were tripping over one another to hand 100-percent LTV loans to even credit-risky borrowers are over. But if your customers are reasonable credit risks, there remain options for them in today's tighter lending climate. I spoke with two lenders on the front lines to hear what borrowers can expect. Here are highlights of what they had to say:

1. 95 percent LTV is the best most borrowers will get. "Lenders want some skin in the game today," says Greg Kundinger, president of HomeFirst Mortgage in Alexandria, Va.

Although it's still possible to put together a first and a second loan to cover 100 percent of the purchase cost, lenders' guidelines are in a constant state of flux, so a 100-percent deal that would work one week might not be accepted the next week, says Michael D'Alonzo, president of Creative Mortgage Group in Willow Grove, Pa. Thus, if your customers can't risk that kind of uncertainty, they'll have to come up with at least 5 percent down.

2. Tax-law changes make private mortgage insurance more attractive. The federal government has permitted home owners to deduct PMI premiums from their federal income taxes since 2006. That authority was due to expire after just a year but the government last year enacted a three-year extension. That gives a shot in the arm to borrowers who would have trouble putting together the kind of piggyback loan package so popular during the housing boom as a way to avoid the cost of PMI. Now that cost has less of a bite.

3. Piggyback loans are still available, but the choices are limited. Many lenders offering second loans have left that sector and those that remain want to see higher credit scores among applicants.

"If your credit score is below 680 today, you won't be able to get more than 90 percent financing," says Kundinger. And to get even that high LTV, "you pay the price for it" in increased points, he says.

4. FHA is genuinely back. Thanks to internal reforms to speed processing and the collapse of its competition from subprime loan products, FHA saw an almost 60 percent increase in new originations in 2007, NAR data show. You can expect even more business to flow to federally backed loans this year now that the federal government, as part of the economic stimulus package, has increased the program's loan limits to a maximum $729,750 from $362,750. NAR is still crunching the numbers, but you can expect tens of thousands of more home sales per month using FHA financing once HUD formally administers the new limits.

5. Conforming loans are getting bigger, too. The federal government included higher conforming loan limits in the stimulus package, so borrowers will be able to get favorable, non-jumbo rates on financing up to the same $729,750 limit. The actual high-end limit will depend on the market, and HUD will decide that, because the Fannie and Freddie limits will track FHA. Not only will higher conforming loan limits increase homeownership affordability, but they'll open the door for homeowners to refinance their jumbo or piggyback financing into a lower-rate conforming loan.

You can get more information on the impact of the stimulus bill on housing at REALTOR.org.

Posted on February 22 at 11:11 AM | Permanent Link | Add a Comment (0)

By Wendy Cole

As a major subprime lender, behemoth California-based Countrywide Home Loans quickly devolved from one of America’s most successful mortgage companies to perhaps its most tarnished. But the company sure isn’t hiding in the corner waiting for its reputation to repair itself.

While Bank of America’s bailout will certainly help the lender write its next chapter, Countrywide is taking steps at a local level to help real estate practitioners and their clients navigate today’s challenging markets. Nearly 100 Chicago area real estate pros gathered Wednesday at the tony East Bank Club at a panel organized by Countrywide where the topic was: Protect Your House: Resetting Expectations for Sellers in your Marketplace.

It makes sense in a way. Why shouldn’t a company at the heart of the lending crisis

be in the vanguard of trying to turn things around? Who would understand the problems besetting the industry more viscerally than Countrywide? And clearly the packed audience at the presentation suggested that the marketplace of real estate professionals was as interested in what the experts had to say, as they were in the complimentary muffins and bagels.

A major theme of the morning session was the importance of building strategic business alliances with appraisers, attorneys, title companies, home remodelers, and, yes, lenders like Countrywide, noted Drago Stevanovic, a Countrywide Home Loan manager in Chicago. Otherwise, you can think about supplementing your income in other ways, like he is "by doing 'before pictures' for a cosmetic surgery clinic." (Bada Bing!)

The four Chicago-area real estate veterans on stage then proceeded to share their wisdom about dealing with unrealistic, impatient sellers (that is to say, most of them) during these trying times.
“I now meet with my sellers every week to discuss pricing and changes in the marketplace. I didn’t used to do that. And I ask more questions about (potential) buyers. I have a lot more questions about lenders, I don’t take anything for granted,” said Alex Chapparo of Century 21 SGR and a former president of the Chicago Association of REALTORS ®.

Chelton Blackburn of Coldwell Banker Residential said frankly that the shrinking buyers’ pool, along with tightened credit standards, was tough for some sellers to understand. “Last year, I had 27 deals that couldn’t close because buyers couldn’t get financing” he said. “Sellers need to help buyers buy things.”

Expanding inventories create challengers for sellers too. “When I have someone who wants to sell a two-bedroom, two-bath condo, I have to show then that there are 128 other properties like that on the market. I educate sellers with the numbers, It’s hard to argue with those,” said Karen Breen Elia of RE/MAX Signature.

But by persevering and working smart, real estate pros can make it through these tumultuous times. The group agreed that the slower market is actually helping to reaffirm the value of real estate practitioners because now homes don’t sell themselves as they seemed to only a year or two ago.

Alana Golubic of Coldwell Banker Residential had a straightforward response to the question of how she resets seller expectations: “I ask people if they'd rather be members of the ‘For Sale Club’ or the 'Sold Club.'”
As the real estate pros in the room chuckled knowingly, the guys from Countrywide nodded their own vigorous approval.

Posted on February 14 at 09:35 AM | Permanent Link | Add a Comment (0)

The NATIONAL ASSOCIATION OF REALTORS® has called on both the U.S. Department of Housing and Urban Development and the Office of Federal Housing Enterprise Oversight to promptly implement the higher conforming loan limits for Fannie Mae and Freddie Mac, and the increased Federal Housing Administration loan limits that Congress mandated and that President George W. Bush today signed into law.

In a letter to HUD Secretary Alphonso Jackson and OFHEO Director James Lockhart, NAR notes that failing to move quickly to allow Fannie Mae, Freddie Mac, and the FHA to increase their loan limits will prolong the nation’s mortgage crisis and make a recovery in the housing market more difficult.

“Our research indicates that the increased FHA loan limits will help an additional 138,000 Americans achieve the dream of homeownership and will allow nearly 200,000 home owners to refinance and potentially keep their homes,” says NAR President Richard Gaylord.

Read more about NAR’s call to action.

Posted on February 13 at 03:25 PM | Permanent Link | Add a Comment (1)

BY ROBERT FREEDMAN

Whenever chief executives of important organizations speak publicly you can bet their remarks are heavily scripted to ensure only market-tested messages get out. That’s why it was so refreshing to sit in on remarks made by Freddie Mac Chairman and CEO Richard Syron the other day.

He spoke before a few hundred politically active REALTORS who were in Washington, D.C., Feb. 5, to learn about today’s key federal real estate issues and get pointers on grassroots activism.

Syron spoke without notes — always a good sign that things might get interesting — and stayed to answer a few questions.

The upshot of his remarks is that we’re in a new kind of housing downturn this time around. Without mincing words, he said we’re probably in the worst housing crisis in the last 80 years because the cause of the crisis has novel components to it.

First is China’s role as the world’s largest emerging market, which has been exporting huge amounts of capital into financial markets while at the same time exporting huge amounts of low-cost labor. Thus, you have unprecedented liquidity (from its capital exports) in an environment of low inflation (from its labor exports).

Second is the securitization boom, which married the creation of novel mortgage financing instruments with a market of hungry investors worldwide.

Those two trends are the ones Syron says are novel to this downturn. Two other components —

the emergence of frothy housing markets and over-aggressive efforts by lenders and others to get people into homeownership before they’re financially ready — are things we’ve seen before because they’re products of human nature.

These four components interacted fine as long as home price appreciation remained positive, but once prices flattened or, in some markets, retreated, the system broke down.

Even so, Syron is bullish on the future. He gives the Federal Reserve (where he used to be a governor) credit for rolling out its dramatic three-quarters of a point cut in its short term interest rate a few weeks ago. The move signaled that the Fed understands the gravity of the situation.

He also credits Congress for taking serious steps to pass an economic stimulus bill. Of course, he’s glad the stimulus approach under consideration increases the conforming loan limits, to $720,000 That’s something Freddie Mac and its sister organization, Fannie Mae, have been seeking for years, as has NAR.

But more crucial to him, he said, is speed. Whatever the federal government ends up doing, it needs to get something enacted this spring if the action is to translate into a meaningful stimulus.

But he’s also bullish because of the country’s long-term growth prospects. Unlike much of Europe, the United States continues to grow thanks to strong immigration and robust birthrates.

Given all the talk today about excess inventory in many markets, it’s somewhat comforting to hear him say we still need 12 million new housing units over the next decade to accommodate our population growth. As he said early in his remarks, excess inventory is a problem but it’s not an intractable one.

Thus, he thinks analysts are missing the mark when they contend home prices might fall 30 percent or more before markets stabilize. He says price declines from peak to trough won’t be anywhere near that.

Posted on February 5 at 02:29 PM | Permanent Link | Add a Comment (0)