Making sense of the story

• During the height of the market, borrowers could get away with lying about their income, debt obligations, and the like to obtain financing.  But not anymore.  According to a representative from the Mortgage Bankers Association, there are “more fraud checks than ever, and it’s on every loan, not just a sample.”

• More important, perhaps, the focus now is on preventing fraud rather than dealing with it after the fact.

• Sometimes the fraud check is as simple as a quick call to the customer right before the loan is closed to verify information supplied on the loan application.  Such a call to an otherwise unsuspecting borrower can sometimes uncover a lie perpetrated by a corrupt loan officer who’s in it for the commission – or more.

• In other cases, lenders are using sophisticated databanks to spot fraudsters.  One website, for example, provides salary data on various industry positions so the lender can determine if the borrower is overstating his income.

• Another site provides historical wage data, and yet another checks the information supplied by self-employed borrowers, including whether the borrower’s company exists, who the principals are, the number of employees, and the annual revenue.

• There are also sites that will tell lenders where there are judgments against the borrower or liens against other properties the borrower might own.

Related articles

• Has Mortgage Fraud Decreased? (lawprofessors.typepad.com)

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staff photo of Lawrence Yun (Photo credit: Wikipedia)

With rising rents, more renters are being swayed into home ownership, even in pricey housing markets like New York.

For example, one New York renter said he started looking into owning a home when his landlord tried to increase his rent by 13 percent when his lease was up for renewal. He found that he could buy a home and get the same amount of space for cheaper than continuing to rent, plus he’d be building equity.
Other renters are starting to see that buying may be a better option for them, too.

Rents are increasing at about the same pace that home values are dropping, says Stan Humphries, Zillow’s chief economist, who says, according to their surveys, home prices have dropped 3.1 percent year-over-year whereas rents have increased 2.5 percent.

“Herein lie the seeds to eventually more interest in buying on the part of consumers, which will help put a floor under home prices,” Humphries told Investors Business Daily. Recent housing surveys, including Zillow’s, are showing home prices are starting to rise in recent months.

Affordability in housing has been at record highs from the combination of falling home values and record-low mortgages. Humphries says that housing prices have rolled back to 2003 levels.

“That increased affordability in the face of rising rental prices will begin to get buyers off the fence this year,” Humphries says. “What’s been keeping buyers on the fence is a crisis of confidence. People who don’t have a job, or who are worried about losing their job, don’t buy homes. They also don’t want to buy an asset they think is rapidly depreciating.”

National Association of REALTORS®’ Chief Economist Lawrence Yun says the tighter restrictions from lenders are also preventing many potential buyers from securing financing in order to buy. But for those who are able to qualify, Yun says “it’s better to get in now” than wait.

Source: “Rising Rents Prompt Buys, May Help Housing Recover,” Investors Business Daily (May 10, 2012)

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Refinance loan when needed (Photo credit: Wikipedia)

Those who refinanced their mortgages a year or so ago, when interest rates averaged just below 5 percent for a 30-year fixed-rate loan, may be wondering whether it’s time to refinance yet again now that rates are at least a full percentage point lower.

Making sense of the story

• As of Thursday, according to Freddie Mac’s weekly survey, the average rate on a 30-year loan was 3.83 percent, down from 4.63 percent a year ago, setting a record low.

• According to financial planners, homeowners considering refinancing first should delve into their financial goals, specifically the length of time they plan to live in the home.

• Some homeowners decide it makes more sense to stay with their current mortgage, especially if the savings are small or they plan to move within a year or two.  According to one financial planner, when homeowners refinance, they’re not building equity; they’re starting at the beginning of the amortization tables.

• Amortization schedules work like this: In the first few years, almost all of the payment goes toward interest, so the longer the homeowner has the loan, the more is put toward the principal.

• Those who refinanced in the last year or two don’t have to consider amortization tables, but they do need to know their equity position – and when refinancing would begin to pay off.

• To calculate that, start with a rundown of all the closing costs, then divide the closing costs by the amount expected to be saved on each monthly payment.

• Depending on the lender, most homeowners likely need to have at least 20 percent equity, and maybe a little more, if they want to wrap closing costs into the new mortgage.

Read the full story

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Photo courtesy of DSnews.com

Have home prices finally hit bottom? Many analysts think so. According to the latest forecast by Fiserv, the market watcher sees a big boost to home prices on the horizon, projecting that home prices will rise nearly 4 percent per year for the next five years.

The real estate markets expected to see the biggest increases in home prices will likely be those hardest hit the last few years by foreclosures, such as in Phoenix and Las Vegas, and areas where prices have fallen the most, according to Fiserv’s forecast.

Housings rising affordability mixed with falling inventories of for-sale homes are the main factors driving the expected price increases, according to Fiserv.

Initially, investors are expected to help drive most of this price increase, and then followed by first-time and trade-up buyers as they re-emerge in bigger numbers to the market.

Source: “U.S. Home Prices Could Rise 4% a Year, Forecast Says,” USA Today (May 8. 2012)

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An icon from the Crystal icon theme. Nederlands: Een icoontje van het Crystal icon thema (Photo credit: Wikipedia)

Thirty-three percent of Americans say they expect home prices to rise in the next 12 months, the highest level in more than a year, according to Fannie Mae’s March 2012 National Housing Survey of consumer attitudes about the housing market.

The number of people who say now is a good time to buy is also on the rise, increasing to 73 percent—also the highest level in more than a year. The percentage who said it’s a good time to sell a home also increased one point to 14 percent in March.

Meanwhile, more Americans expect rental prices to rise and are projecting an increase by 4.1 percent over the next year, the highest number recorded to date.

“Conditions are coming together to encourage people to want to buy homes,” says Doug Duncan, Fannie Mae’s chief economist. “Americans’ rental price expectations for the next year continue to rise, reaching their record high level for our survey this month. With an increasing share of consumers expecting higher mortgage rates and home prices over the next 12 months, some may feel that renting is becoming more costly and that home ownership is more compelling house choice.”

Source: “Americans’ Expectations Align to Encourage Home Buying,” RISMedia (May 6, 2012)

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Foreclosure signs, Mortgage crisis, (Photo credit: Wikipedia)

The offers seem like answers to the prayers of a struggling homeowner: A promise of legal tactics to forestall foreclosure, reduce mortgage balances and interest rates, or restore credit.  But these so-called mass joinder lawsuits being advertising in mailings are fraudulent – sent out by companies purporting to be law firms, according to a consumer alert by the Federal Trade Commission’s (F.T.C.) website.

Making sense of the story

• Consumers can lose valuable time to these dishonest players – not to mention money.  The nonprofit Lawyers Committee for Civil Rights Under Law estimates that homeowners nationwide who reported scams to its database have lost more than $60 million in the last two years alone.

• There are many credible law firms around to help homeowners.  But some businesses might be promoting themselves as providers of legal services, they might have only one lawyer on retainer, as a way around F.T.C. rules that allow only lawyers to collect upfront fees on mortgage aid.

• Such firms, and people posting as lawyers, are fueling a 60 percent jump in complaints about mortgage scams this year, according to a report by the homeownership Preservation Foundation, which helps distressed homeowners.

• When speaking with a lawyer, consumers might ask about the lawyer’s track record, including documentation of successes via media reports or signed court documents awarding borrowers money or relief.

• Consumers should beware of promises.  According to the Homeownership Preservation Foundation, “legitimate lawyers don’t make guarantees, just like doctors don’t.”

• There are plenty of free services available at nonprofit groups certified by the Dept. of Housing and Urban Development.

• The CALIFORNIA ASSOCIATION OF REALTORS® also has information available about short-sale and foreclosure-prevention fraud.  Visit http://www.car.org/aboutus/forconsumers/loanfraud/ for more information.

More info

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• Three Sarcramento Attorneys Arrested For Mortgage Scam (nevadacounty.com)

Mortgages sold everywhere. (Photo credit: Wikipedia)

I am certainly seeing housing prices on an upward trend locally. Bidding wars are happening on homes priced under $200,000 which just a couple of years ago was unheard of.  The bargains seem to be slipping away and now is the time to buy.

If you  want a bargain you may want to act now because the housing market is in the midst of a turnaround, economists say.

Home prices have fallen and mortgage rates are hovering near record lows, pushing home affordability for the average family to record highs. Meanwhile, rents have been on the rise, making owning a home cheaper than renting in most areas of the country, according to recent surveys.

But the housing deals aren’t expected to stick around much longer.

An improving job market, a decrease in the number of home owners falling behind on their mortgage, and an anticipated improvement in access to mortgages is expected to help home prices start bouncing back by next year, economists say.

Investors eyeing profits in rentals also have been snapping up bank-owned properties, which Clear Capital’s Alex Villacorte attributes as helping to lead to an increase in prices on foreclosed properties. This “could have a significant impact on the market overall in terms of providing a rising floor to home values,” Villacorte told CNNMoney.

Some areas are already seeing prices rise. In Phoenix, housing prices have already increased 8.4 percent during the three months ending April 30, and Miami saw prices bump up 4.6 percent quarter over quarter, according to Clear Capital data.

“Stuff I was selling six months ago for $60,000 to $80,000 is now $90,000 to $110,000,” Tanya Marchiol, founder of Team Investments in Phoenix, told CNNMoney.

Loan Rates, Demand Predictions

Buyers may want to act more quickly because mortgage rates are expected to tick up slightly by the end of the year. The increase is being sparked by greater demand, says Doug Lebda, CEO of LendingTree. He predicts 30-year fixed-rate mortgages will inch up to 4.5 percent by the end of the year, which is still low, however, by historical standards.

The Mortgage Bankers Association is also predicting a big leap in mortgage loans next year. For this year, MBA estimates that buyers will take out loans totaling about $415 billion, but by 2013 that number is expected to nearly double to $706 billion.

Source: “Buying a Home Won’t get Much Cheaper,” CNNMoney (May 3, 2012) and “Time To Trade The Lease For A Mortgage?” NPR (May 1, 2012)

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• Fixed Mortgage Rates Fall to All-Time Low on Weak GDP Report, Euro Zone Concerns (usnews.com)

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REO or bank owned properties have risen 5.5 percent over the last year, whereas market sales prices have fallen 2.9 percent, Clear Capital reports in its April housing data index.

Investors are snatching up REOs, fueling price gains for distressed properties. Clear Capital, which measures median price per square foot, finds that REO prices are rising at a much quicker pace than prices for non-REO sales.

“Should investor interest continue to drive the expansion of REO-to-rental programs over the next several months, there could be a significant impact on the market overall in terms of providing a rising floor to home values,” says Alex Villacorta, Clear Capital’s director of research and analytics.

Source: “Bucking Trend, REOs Show Price Gains: Clear Capital,” HousingWire (April 30, 2012)

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Making sense of the story

• There are certain signs to help determine if a particular neighborhood is on the verge of a rebound.  For instance is local employment on the upswing?  That’s a critical factor for a region to get itself on the path to recovery.  Improving jobs picture has led to shrinking housing stock across the country, as investors and bargain hunters have started buying up foreclosures that have been preventing a recovery.
• For years, buyers were scared of overpaying for a home, but less so now.  Many buyers have grown accustomed to thinking they’ll score deals, so they tend to act slowly, and typically start bidding around 10 percent to 15 percent below list price.  However, a growing number of buyers are beginning to realize that if they wait too long in this market, they may miss out.
• Sellers can hold firm on price if they’re patient.  The days of having to deal with low-ball offers are coming to an end.  The higher the price, the more patient the seller must be.  Cheaper homes are affordable to more buyers and appealing to investors, so recoveries usually start there.
• Sellers should keep in mind that while they don’t have to placate low-ball offers anymore, they also can’t shoot for the moon either.  Working with a REALTOR® and setting a realistic price from the get-go is key.
• Sellers should know what they’re competing against.  Homeowners should let their home’s value dictate the price.  While this may seem self-evident, some owners may have lost sight of it during the bust.  On the one hand, some sellers clung to the false hope of a return to boom prices, so they set prices unrealistically high.  Others may have gone too far the other way, and set their price too low.
• It’s also important that sellers understand they’re no longer competing with gutted foreclosures.  Buyers are tired of looking at worn-down, neglected, distressed properties and often don’t have much extra money to do a lot of fixing up.  REALTORS® often report their clients are willing to pay a little more for a home that’s ready to move into.

Read the full story

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Used in wikipedia:Homeownership in the United States. Data from http://www.census.gov/hhes/www/housing/hvs/annual09/ann09t22.xls (Photo credit: Wikipedia)

Sixty-two percent of Americans own a home, which is the lowest percentage in more than a decade, according to a new Gallup poll. Home ownership rates soared to 73 percent during the housing boom years in 2006 and 2007 but since that time have continued to drop.

A flood of foreclosures has wreaked havoc in many communities in recent years, forcing some former home owners to become renters while also pulling overall home prices down leading to more underwater home owners. The mix of fallen home values and record low interest rates, however, has pushed housing affordability at record levels, making the average house more affordable to the average family.

So while the home ownership rate has fallen in recent years, Americans haven’t lost their thirst for home ownership. Seventy-percent percent of Americans surveyed in the recent Gallup poll say that now is a “good time” to buy a house, which is up from 53 percent in 2008.

While more view home buying as attractive nowadays, some potential buyers are still being kept on the sidelines due to more stringent lending standards by banks in recent years.

“Potential home buyers can take advantage of today’s low mortgage interest rates only if they can meet significantly more stringent down payment and underwriting standards than was the case prior to the financial crisis,” writes Dennis Jacobe, Gallup’s chief economist, wrote about the survey results.

The U.S. Census, which also tracks the home ownership rate, has calculated that the home ownership rate reached its highest point in 2004 at 69.2 percent and dropped to 66.4 percent by the end of 2011.

Source: “Home Ownership Rate Falls to Decade Low, Poll Shows,” MSNBC.com (April 26, 2012)

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