Despite tougher mortgage guidelines and better loan disclosures for consumers, mortgage fraud is on the rise, according to the FBI.
Fraud has many varieties and it’s estimated cost to the nation is between $4-6 billion annually. Today, common mortgage fraud scams target homeowners behind in their mortgage payments and/or facing foreclosure. And, despite the hordes of legitimate organizations that dedicate themselves to helping consumers, mortgage fraudsters proliferate.
With respect to mortgage paperwork, it’s always wise to read what you’re signing, and to take time to understand what it means. If you’re uncomfortable reading mortgage documents, ask for an attorney’s help. And don’t worry if you don’t have the budget — many states offer free or discounted help via advocacy groups.
The number of foreclosure filings rose 3 percent in September, according to foreclosure-tracking firm RealtyTrac. The term “foreclosure filing” is a catch-all word for housing, comprising default notices, scheduled auctions, and bank repossessions.
September marked the 19th straight month that the number of filings topped 300,000, and the first month in which 100,000 repossessions were logged.
As usual, a small number of states dominated the national foreclosure figures, accounting for more than half of all repossessions.
California : 17% of all repossessions
Florida : 13% of all repossessions
Michigan : 7% of all repossessions
Arizona : 7% of all repossessions
Texas : 5% of all repossessions
Georgia : 5% of all repossessions
Thankfully for home sellers, mortgage servicers appear to be metering the pace at these newly bank-owned homes are made available to the public. RealtyTrac notes that, in doing so, servicers prevent “the further erosion of home prices”.
That said, distressed properties still sell at a steep discount.
In the second quarter of 2010, the average sale price of homes in the foreclosure process was 26 percent lower than the average sale price of homes not in the foreclosure process. It’s no surprise, therefore, that, based on RealtyTrac’s preliminary data, 31 percent of all homes sold in September were “distressed”.
There’s lot of good deals out there, in other words, but they come with certain risks.
Buying a foreclosed home is not the same as buying a non-foreclosed home. Specifically, you’re buying from a corporation and not from a “person”. Contracts may vary, and so may terms.
Therefore, home buyers — even experienced ones — should talk with a real estate agent before making an offer. It’s important to understand the foreclosure-buying process.
It’s unwelcome news for this season’s home buyers, and existing homeowners with plans to grab lower rates. Mortgage rates made new lows last week and may have reached a turn-around point.
The “Fed Minutes” is published 8 times annually, and is the official meeting recap for the Federal Open Market Committee. Similar to the meeting minutes released after a corporate conference or condo association gathering, the Fed Minutes details the conversation and debate between meeting attendees.
Minutes are the lengthy companion to the Fed’s brief, post-meeting press release.
Because of its content, the Fed Minutes is closely read by Wall Street and economists. It’s insight into the talk that shapes our nation’s monetary policy and, within the text, there’s often clues about the Fed’s next move.
Here’s some of what the Fed discussed last month:
On inflation : It’s running at lower-than-optimal levels
On housing : Post-tax credit, housing stalled in July
On stimulus : The Fed may intervene in open markets within the next few months
The over-riding theme within the minutes was that the U.S. economy is growing a steady pace, albeit slower than what’s optimal. The Fed is prepared to push things along if the economy slows further and news like that is helping stock markets.
Bond markets are losing. Rates are rising.
For now, mortgage rates hover near all-time lows. If you haven’t locked a mortgage rate yet, your window may be closing. Once the economy turns around for certain, mortgage rates will be among the first of the casualties.
Mortgage markets improved last week on mixed messages about the economy, and a growing belief that the government will move to stimulate the economy.
Conforming mortgage rates eased lower.
According to Freddie Mac’s weekly mortgage market survey, average mortgage rates nationwide fell to new all-time lows last week. On the other side of that point, however, is that the accompanying “points” for today’s low rates have climbed to their highest levels of 2010.
In other words, mortgage rates are down, but closing costs are up.
There were two main stories driving mortgage rates last week. The first was the Federal Reserve.
Although nothing has been said specifically, markets are speculating that the government will add new layers of market support to spark the economy.
The prevailing thought is that — if there’s intervention — the Fed will buy treasuries and mortgage bonds, driving up prices and pushing down yields. Rates dropped last week in anticipation of such a move.
The second factor in falling mortgage rates was Friday’s jobs report.
Economists expected the economy to shed 5,000 jobs in September. Instead, it lost 95,000, anchored by the elimination of temporary census workers and job losses in local governments. The private sector didn’t fare so poorly, adding sixty-four thousand jobs. However, that, too, fell short of expectations.
The results contributed to a mortgage market rally already in-process.
This week, there’s a number of releases that should keep mortgage rates on the move — up and down — including Fed Minutes (Tuesday), Producer Price Index (Thursday), and Consumer Price Index, Retail Sales and a confidence survey (Friday).
Mortgage rates are low and may not stay that way. If you’re floating a mortgage rate, or wondering whether now is the time to lock, talk to you loan officer. Rates are expected be volatile this week.
On the first Friday of each month, the Bureau of Labor Statistics releases its Non-Farm Payrolls report from the month prior. This month, though, because the first Friday of the month was also the first day of the month, the report was delayed one week.
The report hit the wires at 8:30 AM ET this morning.
More commonly called “the jobs report”, the government’s non-farm payrolls data influences stock and bond markets, and, in the process, swings a big stick with home affordability figures nationwide.
Especially in today’s economic climate.
Although the recession has been deemed over, Wall Street remains unconvinced. Data fails to show the economy moving strongly in one direction or the other and, absent job creation, economists believe growth to be illusionary.
Consider:
With job creation comes more income, and more spending.
With more spending comes growth in business
With growth in business comes more job creation
And the cycle continues.
The prevailing thought is that, without jobs, consumer spending can’t sustain and consumer spending accounts for two-thirds of the economy. No job growth, no economy recovery.
But there’s another angle to the jobs report, too; one that connects to the housing market. As the jobs market recovers, today’s renters are more likely to become tomorrow’s homeowners, and today’s homeowners are more likely to “move-up” to bigger homes. This means more competition for homes at all price points and, therefore, higher home values.
And that brings us to today’s jobs data.
According to the government, 95,000 jobs were lost in September. Economists expected a net loss of 5,000. However, if public sector jobs are excluded from the final figures, jobs grew by 64,000. This is a positive for the private-sector, but still trailed expectations.
Wall Street is voting with its dollars right now and mortgage bonds are gaining, improving mortgage pricing.
So, although the September 2010 jobs report doesn’t reflect well on the economy overall, home affordability around the country should improve as a result.
Starting Monday, December 13, 2010, Fannie Mae is changing its mortgage lending guidelines.
For some mortgage applicants , the loan approval process will simplify. For others, it will toughen. How you’ll be affected personally will depend on your credit profile and your loan characteristics.
Among the biggest changes from Fannie Mae is a new set of guidelines for gift funds. When the new rules roll out, accepting cash gifts for downpayment will be easier.
Undetr the new guidelines, buyers of owner-occupied, 1-unit properties (i.e. single-family homes, condos, townhomes) can forgo Fannie Mae’s typical, minimum 5% personal downpayment contribution. Downpayments on homes meeting the above criteria can be comprised of 100% gifted and/or granted funds.
Buyers of second homes and multi-unit properties, however, are not exempt.
There’s also two changes pending with respect to revolving debt.
Debt with less than 10 payments remaining may no longer be waived in debt-to-income ratio calculations
Debt lacking a monthly payment on credit must be assigned a payment equal to 5% of the outstanding balance
Both of the above should increase the number of loan denials in 2011.
And, lastly, Fannie Mae changes some of its documentation requirements, the most noticeable of which will be with respect to income verification. Salaried workers and applicants whose commission/bonus accounts for less than a quarter of their income will have fewer paystubs to produce for underwriting.
Loan applications taken prior to December 13, 2010 are exempt from the new rules.
Fannie Mae’s complete guideline changes are available online at http://efanniemae.com.
Conforming mortgages is so named because, literally, they conform to the mortgage guidelines set forth by Fannie Mae and Freddie Mac.
Of the many traits of a conforming mortgage, one is “loan size” and loan sizes have limits. Mortgages exceeding this loan size limit cannot be securitized as a conforming mortgage and, therefore, are ineligible for conforming mortgage rates.
Conforming mortgage rates are often the cheapest source of mortgage money , all things equal.
Each year, the government re-evaluates its maximum allowable loan size based on “typical” housing costs nationwide. Loans in excess of this amount are often called “jumbo”.
Between 1980 and 2006, as home prices increased, so did conforming loan limits — from $93,750 to $417,000. Since 2006, however, home prices have retreated but the conforming loan limit has not.
In 2011, for the 6th consecutive year, $417,000 will be the country’s conforming mortgage loan limit.
Conforming loan limits very by property type. The complete breakdown is as follows:
1-unit properties : $417,000
2-unit properties : $533,850
3-unit properties : $645,300
4-unit properties : $801,950
Despite the limits, some parts of the country get “loan limit exceptions”. In areas considered “high cost”, conforming loan limits range from $417,001 to $729,750. High-cost is defined by the median sales price of a region.
Los Angeles County, for example, is a high-cost region, along with a lot of California. There are less than 200 such areas nationwide, though.
You can verify your local market’s loan limit via the Fannie Mae website. A complete county-by-county list is published online.
Consistent with calls of a housing rebound, the Pending Home Sales Index rose again in August. It marks the second straight month of improvement after May’s post-tax credit drop-off.
A “pending home” is an existing home under contract to sell, but not yet closed.
According to the National Association of REALTORS®, 4 out of 5 pending homes close within 60 days, and many more close within 90 days. For this reason, the Pending Home Sales Index is an excellent forward-indicator for housing.
As a real-life illustration, after July’s 27% plunge to an 11-year low, Existing Home Sales recovered 8 percent in August. This was not a surprise, though, because July’s Pending Home Sales Index predicted it.
Region-by-region, the Pending Home Sales Index varied in August, suggesting better sales levels in the South and West markets:
Northeast : -2.9% from July
Midwest : +2.1% from July
South : +6.7% from July
West : + 6.4% from July
That said, real estate markets aren’t “regional” — they’re local. Just as there are improving markets within the Northeast Region, there’s worsening markets in the West.
Overall, buyers are being drawn into housing by low mortgage rates, affordable homes, and ample supply. If the August Pending Home Sales Index is foreshadowing the fall housing market, home prices appear slated to rise.
For the third straight week, mortgage markets showed little conviction in the face of contrasting data. Mortgage bonds ended the week slightly better, but mortgage rates did not.
Conforming mortgage rates were up-and-down all week before ending the week with a slight worsening. The inter-day volatility has come to characterize the current mortgage market.
In part, rates are jumpy because of data; it’s unclear when the economy is expanding or contraction — despite the “official call” of the recession’s end in June 2009.
Consider the conflicting reports from last week. Separate Consumer Confidence reports showed sentiment falling in September, but on the other hand:
In other words, the economy is in recovery, but the average citizen isn’t believing it. That causes purse-strings to stay tight, thereby retarding economic growth.
Wall Street is struggling with the contrast, and constantly changing its outlook. It’s making mortgage rates tough to pin down and this week should reflect that. In addition to a home sales report and new consumer confidence data, the government prints its market-moving Non-Farm Payrolls report.
More commonly called “the jobs report”, Non-Farm Payrolls details the workforce, its size, and its Unemployment Rate. There’s expected to be little change from August, a month considered “fair” by recent employment standards. If the jobs report shows improvement and/or strength, look for mortgage rates to rise. If the report does deterioration and/or weakness, look for mortgage rates to fall.
The Non-Farm Payrolls will be released Friday at 8:30 AM ET.
The value of a home is based on the basic economic principle of Supply and Demand. When the number of buyers exceeds the number of sellers, home prices rise. Conversely, when sellers outnumber buyers, home prices fall.
There’s always a opening price point for negotiation and that figure often factors in specifics like square footage, number of rooms, and finishes and amenities. Location matters, too.
On a ZIP code-by-ZIP code basis, prices can vary wildly and it’s tiny, tony 91008 — located in Duarte, California — that tops the 2010 Forbes list of America’s Most Expensive ZIP Codes. Home to fewer than 1,400 residents of Los Angeles County, the ZIP code’s median home cost is $4,276,462.
By contrast, the median home cost across all of Duarte’s ZIP codes is just $358,454.
As listed by Forbes, America’s 10 most expensive ZIP codes are:
Duarte, CA (91008) : $4,276,462
Atherton, CA (94027) : $4,010,200
Rolling Hills, CA (92074) : $3,892,456
Alpine, NJ (07620) : $3,814,885
New York, NY (10014) : $3,785,445
Beverly Hills, CA (90210) : $3,684,150
New York, NY (10065) : $3,626,001
Belvedere (94920) : $3,283,269
New York, NY (10012) : $3,221,371
Santa Barbara (93108) : $3,151,220
The real estate market is a local one, as evidenced by the Forbes list. Even within large cities like New York, there are areas that stand out from the pack in terms of cost and affordability and the same is true for all cities.
Therefore, when you need local market data , look past the “national statistics”. Talk to a real estate agent with local market knowledge instead. It’s the most reliable way to get data that matters.
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The number of foreclosure filings rose 3 percent in September, according to 
The Federal Reserve released its 
Mortgage markets improved last week on mixed messages about the economy, and a growing belief that the government will move to stimulate the economy.
On the first Friday of each month, the Bureau of Labor Statistics releases its Non-Farm Payrolls report from the month prior. This month, though, because the first Friday of the month was also the first day of the month, the report was delayed one week.
Starting Monday, December 13, 2010, Fannie Mae is changing its mortgage lending guidelines.
Consistent with calls of a housing rebound, the Pending Home Sales Index rose again in August. It marks the second straight month of improvement after May’s post-tax credit drop-off.
For the third straight week, mortgage markets showed little conviction in the face of contrasting data. Mortgage bonds ended the week slightly better, but mortgage rates did not.
The value of a home is based on the basic economic principle of Supply and Demand. When the number of buyers exceeds the number of sellers, home prices rise. Conversely, when sellers outnumber buyers, home prices fall.