Buyer Rush to Beat ‘Jumbo’ Mortgage Deadline
More buyers in high-cost areas may be motivated to purchase a home before an Oct. 1 deadline when the government plans to scale back the size of “jumbo” mortgages it guarantees in costly real estate markets.

On Oct. 1, the maximum loan amount that Fannie Mae and Freddie Mac is set to decrease from $729,750 to $625,500. This might make mortgages more expensive or more difficult to get for buyers in high-cost areas, MSNBC.com reports.

For example, after Oct. 1, a borrower who seeks a government-backed mortgage for a $1-million property may have to come up with a $370,000 down payment instead of $270,000, Rob Chrisman, a mortgage banking consultant from San Rafael, Calif., told MSNBC.

Up until 2008, any loan more than $418,000 was considered a jumbo loan, but that later swelled to $625,500 and then was temporarily set at $729,750 (which expires at the end of September).

Once the current jumbo loan limit expires, lenders who want to make loans over $625,500 either will have to hold onto the mortgage themselves or find a private investor to purchase it.

Guy Cecala of Inside Mortgage Finance is confident that private lenders will step in to make up any of the downfall from the GSEs change. He’s already pointing to the signs: In the last quarter of 2010, private lenders originated more loans over $417,000–which is considered the traditional jumbo market–than did government agencies.

Source: “Rules for ‘Jumbo’ Mortgages to Change This Year,” MSNBC.com (April 25, 2011)

Bill Would Allow REO Purchases with Retirement Funds
A bill introduced in the U.S. House of Representatives would waive withdrawal penalties on certain retirement plans if the funds were used to buy a house that has been in foreclosure for a year or more, HousingWire reports.

The bill, introduced recently by congressman and real estate professional Bill Posey, R-Fla, is expected to apply to Roth IRAs, 401(k) plans, and company pension plans.

The legislation’s aim is to promote REO home purchases by owner occupants or second home owners rather than investors just looking to “flip” a foreclosure for fast money. According to the bill, purchasers must agree to hold the property for at least two years to be exempt from early retirement plan withdrawal penalties.

“It’s just another idea to help the housing market,” says press secretary George Cecala.

The bill has been sent to committee for further consideration.

Source: “Bill Would Waive Retirement Plan Withdrawal Penalties to Buy REOs,” HousingWire (April 18, 2011)

Confidence in value of homeownership persists through bust
Despite the decline in home prices, 81 percent of U.S. adults believe buying a home is the best long-term investment a person can make, according to a national survey by the Pew Research Center.

MAKING SENSE OF THE STORY

• Homeownership topped the list of long-term financial goals for Americans, according to the study.  Respondents rated homeownership, as well as living comfortably in retirement, as more important than sending children to college or leaving offspring an inheritance.
• “Owning a home is really a part of the American dream, and that is just part of the American psyche and something that people aspire to,” according to one of the study’s authors.
• Although the vast majority of adults surveyed are in favor of owning a home, the public’s faith in real estate has somewhat declined compared with the last time a comparable survey asked people about the wisdom of investing in real estate.  In the Pew Research Center survey, 37 percent of respondents said they “strongly agree” that homeownership is the best investment a person can make, while 44 percent said they “somewhat agree.”  The same question was asked by a CBS News/New York Times survey in 1981, and at that time, 49 percent “strongly agreed,” and 35 percent “somewhat agreed.”
• While home prices have entered a renewed decline after showing some improvements last year, many economists believe that the worst of the housing crisis is probably over, which could help explain the resiliency in Americans’ optimism.
• Homeowners in the survey were more positive about the financial wisdom of owning a home than were renters.  Among renters, the desire for homeownership remains strong.  According to the survey’s findings, 24 percent of renters surveyed said they rent out of choice and 81 percent said they would like to buy.

Agent’s Surprising Find in REO Leads to 5 Arrests
A real estate agent’s discovery of marijuana growing in a bank-owned home he was listing in Elk Grove, Calif., eventually led police to three other pot houses and five arrests.

Police recovered more than 1,000 marijuana plants from the homes. Also at two of the properties, the marijuana growers had run wiring around the meters to steal electricity, according to police reports.

Despite the police sting, the real estate agent was still able to get the house sold, even for above asking price, and warnings to would-be buyers that the house was a “marijuana grow farm” didn’t seem to serve as a deterrent. The agent sold the property two months following the investigation for $188,000 in just eight days for $8,000 over the asking price.

Critics: New Foreclosure Rules Don’t Do Enough
New rules for the nation’s largest mortgage servicers haven’t yet gone into effect, but critics are already speaking out, saying the new rules fall short of really addressing foreclosure problems and helping home owners.

In a settlement with federal banking regulators, new rules for mortgage servicers include requirements that servicers stop foreclosing while negotiating a loan modification, improve their processing systems, provide defaulting borrowers a single point of contact, and bring in a consultant to investigate complaints by home owners who were foreclosed on because of foreclosure processing errors in 2009 and 2010.

However, Alys Cohen of the National Consumer Law Center says the agreements “do not in any way require the servicers to stop avoidable foreclosures, and that is what we need.”

Critics say the new rules need to do more to help home owners who are trying to modify their loans and stay in their home.

In a letter to the regulators, dozens of groups — including the Consumer Federation of America and the Center for Responsible Lending — are calling for the withdrawal of the agreement in favor of “specific and protective measures regarding loss mitigation, account management, and documentation.”

About 4 million home owners face foreclosure or are near to it, and housing analysts worry that adding those homes to already high inventories on the market will depress housing values even more.

Meanwhile, a coalition of all 50 state attorneys general and the Obama administration are working on a broader settlement to change the foreclosure process and keep more home owners in their homes. The settlement could include a multibillion-dollar penalty to banks. State attorneys general have also called for servicers to reduce the mortgage principal of struggling home owners, a move the servicers have strongly resisted.

The current agreement with bank regulators, does not “pre-empts our efforts,” says Attorney General Tom Miller of Iowa, who is leading the state attorneys general settlement.

Source: “New Rules for Top Mortgage Servicers Face Early Criticism,” The New York Times (April 11, 2011)

Mortgage aid offered to those who cashed out equity
The California Housing Finance Agency announced this week that people who cashed out equity on their home now are eligible for three of the four “Keep Your Home California” programs.

MAKING SENSE OF THE STORY

• Keep Your Home California is a state-run program funded with $2 billion from the U.S. Treasury’s Hardest Hit Fund.  It is designed to help low- and moderate-income people who are unemployed or owe more than their home is worth pay their mortgage.
• There are four individual programs that fall under Keep Your Home California.  Eligible homeowners can get up to $50,000 in assistance from one or more of the four programs combined.
• Under the new rules, people who took equity out of their homes will be eligible for the unemployment mortgage assistance, mortgage reinstatement assistance, and transition assistance programs if they meet all the other program requirements.  Homeowners who cashed out equity will continue to be ineligible for the principal reduction program.
• When the program first started, homeowners who had tapped the equity in their homes were ineligible for the programs.  CalHFA decided to include these homeowners due to the large number of homeowners who were being turned away for assistance.
• Under the program revisions, homeowners who originated mortgages after Jan. 1, 2009 also are eligible for the same three programs.  Originally, these borrowers were excluded because they also are excluded under the federal Home Affordable Modification Program, so CalHFA wanted to be consistent with HAMP.
• To qualify for any of the four programs, homeowners must fall below certain income limits, must be living in the home, and cannot own a second home, among other criteria.  For additional requirements, visit www.keepyourhomecalifornia.org/eligibility.htm.

Bargain-Seeking Home Buyers on the Hunt
Housing prices across the country are at multi-year lows and mixed with low interest rates bargain hunters are targeting real estate.

More investors are heading to the market looking to make cash buys for real estate, investing in second or even a third home, Reuters News reports.

“We’re starting to get a lot more inquiries and assisting in transactions,” says Rocco Papandrea, a senior vice president and wealth management adviser at Merill Lynch in New York. Papandrea says he’s seeing more interest in properties along the West Coast and in Colorado, as well as Florida.

Canadian buyers in particular are expected to be looking to purchase U.S. homes. The Bank of Montreal estimates that one-in-five Canadians is considering buying U.S. property.

With dropping home prices, more cities are looking to be attractive buys, such as the increasing affordability in popular vacation-home designations along the U.S. Sunbelt. For example, home prices have fallen 44 percent in Tampa, 54 percent in Phoenix, 57 percent in Las Vegas, and 49 percent in Miami, the Bank of Montreal reports.

“If the economy keeps clicking along and jobs keep growing, housing will be fine,” says Dean Frankel, a portfolio manager at Urdang Capital Markets in Plymouth Meeting, Pennsylvania, who oversees around $1.7 billion in real estate equity investments.

The economy–and ultimately housing–may then get a boost from the latest unemployment report released Friday. The unemployment rate reached a two-year low of 8.8 percent in March as companies began a brisk wave of hiring, adding employees at the fastest two-month pace since before the recession even started, the Labor Department reports.

The unemployment rate has fallen a full percentage point in the last four months, which marks the sharpest drop since 1983.

Source: “U.S. Housing Market Attracting Bargain-Hunters,” Reuters News (March 31, 2011) and “Unemployment Rate Falls to 2-Year Low of 8.8 Pct.; Employers Add 216k Jobs in March,” The Associated Press (April 1, 2011)