Archive for the ‘Fannie Mae’ Category
Friday, July 11th, 2014
If you are thinking of buying a home with a conventional loan, and you had a short sale, deed-in-lieu of foreclosure or mortgage loan write-off less than 4 years ago, you better be aware of some changes that will take effect in August (yes, next month). What this may mean is that you have to get into contract within the next few weeks or may risk having to possibly wait another year or two to make a home purchase.
Fannie Mae and Freddie Mac, the largest financers for the majority of loans in the U.S., announced earlier this week that they are extending guidelines for purchases after short sales, deeds-in-lieu or mortgage write offs. Starting August 16, 2014, a buyer with a past short sale (or the others) must have closed escrow on that sale 4 years before the date of purchase of a new home. The current rule is two years if the borrower is putting 20% down – see below). If there are extenuating circumstances (a death in the family or accident that affected the ability to pay the mortgage – divorce or job loss do not count as extenuating circumstances, and each lender may have different rules as to what does qualify so make sure to check), then the time period could be lessened to three years upon approval.
This rule, which has surprised many mortgage and real estate professionals, could create problems for those currently looking for homes in a market with low inventory. Note that the new purchase does not have to close by August 16, but the must be fully approved by that time. So long as you get into contract with a few weeks to spare for approval you should be fine.
Here is how the current seasoning requirements look:
- 7 years with less than 10% down
- 4 years with 10% – 19.99% down
- 2 Years with 20%+ down
Here is how the new requirements will look:
- 7 years with less than 10% down (no extenuating circumstances allowed for this program)
- 4 years with 10% down or more (2 year seasoning requirement is allowed if we can document extenuating circumstances that caused the short sale. Taking advantage of a declining market is an unacceptable hardship. I’ve written more about this subject below.)
Personally I have clients who will be affected by this new change if they do not find a home very soon. I am surprised that such a rule would be instituted in the middle of the housing recovery, when there is little inventory and the market is turning from a seller’s market to a buyer’s market. I feel this is a very bad call and that it will have negative effects on the housing market.
If you are in the process of looking for a new home and had a short sale within the last 4 years, you need to discuss this with your mortgage professional and your real estate agent.
Thursday, August 8th, 2013
For those who are regulars to my blog, I have predicted that home prices will soon stop escalating and will return to a “normal” growth, one that ascends slowly but steadily over time. I predicted we would start to see this by the end of this year, and especially heading into 2014. It appears that it is starting to happen right now, even in light of a new study that says that Americans believe housing prices will continue to rise despite rising interest rates.
Clear Capital predicts that home prices across the country will “experience more moderate and sustainable increases” for the remainder of 2013, as we slowly transition into this “new normal” of slower and more consistent gains moving ahead into 2014 and beyond.
In the short term many areas will likely continue to see price increases through the end of the year, despite the rise in interest rates. This could be due in part to rising inventories in many areas. Another explanation is that the rise in interest rates, along with the commonly held notion that these rates will continue to rise with time, may actually push buyers to make purchases in order to avoid higher rates. Likely, many sellers may see this as an opportune time to unload properties while the market is still rising and before rates climb higher, which will undoubtedly price some buyers out of the market.
As rates rise and inventories increase, we may also see a shift in the market, from a seller’s market (which we currently are experiencing in many areas, especially here in the western states), to a buyer’s market. Heading out of the summer buying season and into the Fall and beyond to the holidays, this is a realistic possibility. Demand will of course also continue to be fueled by the strength of local economies.
Interestingly, a study by Fannie Mae in July, the National Housing Survey, found that despite rising mortgage rates, consumers believe that prices will continue to rise. 53% of those polled thought that prices would rise in the next year. Those expecting prices to drop came to under 6%.
All in all, it is still a very interesting time in the housing market. I stand by my theory that prices may continue to rise through the end of the year, although possibly not as drastically. I believe we will continue to see inventory levels inch up in many areas, and that as we head into 2014 we will see prices stabilize somewhat, although I do believe tight lending standards could effect the state of the market as well (a topic for another blog). From there on out I believe we will see a more “normal” market moving forward, meaning one that grows slowly and consistently over time.
If you are thinking of buying or selling it is important to contact a knowledgeable Realtor and mortgage professional in your area to understand the makeup of your specific area.
Wednesday, February 13th, 2013
Is Fannie Mae hurting the real estate market? Those following the practices of this government lending giant know that as of late, Fannie has been accused by many in the industry of price fixing and falsely inflating the real estate market. What is going on, and how can this happen at this time, after the housing market is finally on the road to recovery?
The majority of lenders and those who guaranty loans seem to be cooperating recently with foreclosure avoidance, opting for the less painful option of short sales. They claim that not only do they want to ease the homeowners’ pain, but that they do not have a desire to own property, and would rather take a loss sooner than have to go through the foreclosure process – one which has a hefty price tag.
There is one exception to this rule, and real estate agents are baffled. Fannie Mae – a government agency, who along with it’s cousin Freddie Mac guarantees and purchases loans, and owns or controls about 31 million U.S. mortgages – has been implementing some strategies lately that go against this notion, despite statements of intentions to help:
1. Price Fixing? One of the claims expressed most frequently as of late by real estate professionals is that Fannie is engaging in price fixing. Here’s how it works: instead of opting for short sales, it is choosing to proceed with foreclosures. Then, once the home is ready to list, it’s selected agents list the property for over comparative market value, under Fannie’s Homepath program. No appraisals are needed, as Fannie is the largest provider of mortgage credit. Buyers are jumping in and paying over market value for these properties, and are closing escrows.
Initially this looks like a win-win, as the buyers get their home and do not have to go through the appraisal process, and the area comps are raised with the closing of the property at a value higher than any other recent sales, thus increasing comps for the next seller. Sounds good, right? Not so fast.
The downside of this tactic is that the buyers are literally moving into their new homes as UNDERWATER homeowners. Their homes have no equity – they own the most expensive property in the neighborhood because Fannie has falsely inflated the home values. Appraisers will not look solely to the most expensive home that sold, but will include it with the other comps…thus leading to the next problem:
As a result, future sellers will not likely benefit from the most expensive neighborhood sales (for more on this click here.). Appraisers will include the most expensive sale in their analysis, but they will not focus solely on that one sale; thus the next home to sell, even in better condition and with more to offer, will be evaluated by appraisers based on the combination of recent sales. What seller in their right mind, who did not have to sell, would choose to do so in such a situation? This will keep homes off the market, sustaining low inventory levels.
2. Countering short sale offers at prices higher than comparable sold properties. Another tactic that is being used by Fannie when they DO agree to short sales, is to counter offers received higher than comparable sold properties. Again, this is crazy! These homes will not appraise, but still there are buyers willing – and doing it! – to pay cash over and above appraisal value in order to close escrow. Again, these new homeowners move into their homes in negative equity positions. This tactic also prices many homebuyers out of the market.
I’m not sure how to explain what is going on, but it scares me. Our market is healing right now, and if prices are falsely inflated and comparable sold properties ignored, we will see large market increases in short time periods. If you remember, this is what led to the last market crash. Please share your thoughts.
Friday, November 16th, 2012
Short sales have become part of the real estate landscape, and as one in four homeowners are underwater nationwide, they will likely continue to stay there for some time. Lenders have finally accepted this and have been trying to implement new programs to make them a better choice than foreclosures. For the most part, they are on the right track, but we are still seeing resistance and lots of snares in the road. The new Fannie Mae/Freddie Mac short sale program offers something big to struggling homeowners: the chance to short sale their homes even if they are current on their mortgage payments.
Normally, in order to short sale your home you have to be delinquent on your mortgage payments. Some lenders say they will consider short sales for those not yet delinquent, but the reality is that until you are late with your payments they don’t have the time to tango. Now, if your loan is securitized by Fannie or Freddie, you could be eligible for a short sale even if you are not delinquent, but can prove a hardship.
If you are in this situation you will need to contact your mortgage servicer and ask them to participate in the Fannie/Freddie non-delinquent short sale program. You will want to find a qualified area real estate agent who is experienced in selling short sales, and get your home listed on the market. Once you find a qualified buyer, you will present the contract to your servicer, along with proof of hardship (there is a packet of information you will have to provide – whether your servicer wants it up front or at the time you have an accepted offer will be up to the servicer).
Hardships: There are multiple kinds of hardship that could be acceptable. These may include job loss, injury or disability, major illness, job transfer (there are usually mileage requirements), pay cuts, divorce, and death of a borrower or wage earner, to name a few. If you think you have a hardship, contact your servicer to find out whether you qualify.
Caveats: There are a few things you want to watch out for if you are able to go through a short sale under this new program.
1. Credit implications: As with every short sale, you will need to be aware of potential credit hits. There is no lesser effect for these types of short sales, however, apparently it is in the works. Typically with a short sale you can expect your credit score to drop up to 150 points, but that really depends on where it was before you were approved for a short sale. I have seen some sellers take a big hit, and others barely see any negative effects. If you keep in mind the 150 number, that is most likely the worst case scenario. Hopefully soon there will be an exception with the credit bureaus for these types of short sales.
2. Second liens are another potential snake in the grass with the new program. First lienholders have agreed to pay only up to $6000 to second lienholders upon a successful short sale closing under the program. If you have a large outstanding second lien balance, there is a chance that lienholder may refuse to accept this sum (which is ridiculous, as they would likely get nothing if the home went to foreclosure, but such is the case). Make sure you know exactly how much you owe and what the second lienholder’s policy is – a savvy short sale agent/negotiator will know how to help in this regard.
3. Deficiency states: if you live in a deficiency state (where the state can go after you for the difference between the short sale price and what you owed on your mortgage), you need to beware. The lender may require a cash contribution to cover the difference on the loan balance, or possibly have you sign a promissory note. California is NOT a deficiency state, so selling your home via short sale requires NO contribution from the borrower, and there is no state tax liability on the sale.
As always, I recommend really understanding all the implications of a short sale before embarking on one. Make sure you hire an agent who really knows how to negotiate, as well as all the steps involved throughout the short sale process. If you are informed you will make the best decisions for you and your family. To find out whether your loan(s) is owned by Fannie Mae, visit https://www.knowyouroptions.com/loanlookup. For Freddie Mac loans, go to https://ww3.freddiemac.com/corporate/.
Images courtesy of Dreamstime.
Monday, August 13th, 2012
Many home buyers these days are feeling frustrated, due to lack of inventory, multiple offer situations and competition from investor buyers. In certain price ranges this is the norm, and buyers want to know how they can avoid these situations.
Well, if you are patient there is one program that may help you get the edge you need – elimination of investor buyers. Via a Fannie Mae program called First Look (under Fannie Mae’s HomePath), you can search for Fannie Mae properties that offer a “first look” to owner occupant buyers. For a period of time, usually 15 days (30 days in Nevada), only owner occupant buyers (including public entities and some non profit agencies) will be able to submit offers on these properties. The program is designed to encourage homeownership.
If you or your agent finds a property on the site you are able to submit your offer for the property online – Fannie Mae uses it’s own forms and not standard purchase contracts.
This program is a great way to beat out those investor buyers, but you have to keep checking with the site to see if there are any new listings; some areas have few or none, and some have many, so don’t give up!
For more details on the First Look Program click here.
Thursday, February 16th, 2012
One of the biggest problems with the state of housing ownership is that one in four homeowners in the U.S. are underwater, meaning that they owe more on their mortgage than the current market value of their homes. In many situations this leads to foreclosure or other options like short sales or deeds in lieu of foreclosure. But what about the homeowners who are not delinquent, have been making their payments, maintaining their credit and doing the right thing, despite the drastic drop in value of their homes? Help is on the way…
The new HARP2 (Home Affordable Refinance Program, version 2) debuts March 15. This new revised version of the program hints at helping those who could not qualify under the original program because they were not delinquent. Here are the differences:
Proposed program: The new HARP guidelines, which will be released next month and have been extended until December 31, 2013, will enable underwater homeowners who are not delinquent to refinance their homes. This program will allow refinances, like HARP, for underwater homeowner regardless of whether your loan is with Fannie or Freddie. Here are the requirements:
1. Loans must be current, with a good 12 month payment history – no late payments in the last 6 months and only one is allowed in the last 12 months
2. Loan to value limits will be eliminated, so homeowners will be able to refinance regardless of how far the values of their homes have dropped (under the current HARP, the loan to value limit was set at 125%, so many homeowners did not qualify).
3. No appraisals or underwriting will be required, making the refinancing process easier. There will likely be a home inspection, just to make sure the home is in decent condition, but not a formal appraisal.
4. The loan must be backed by either Fannie Mae or Freddie Mac. To find out if your loan qualifies, you can visit http://www.fanniemae.com/loanlookup/ and http://www.freddiemac.com/corporate/.
There has been some talk of a similar program to HARP that will help those who do not have loans backed by Fannie or Freddie. Hopefully in the future we will see such a program.
The new HARP will undoubtedly help many people stuck in that gray area – where they are not delinquent but feel trapped under a mortgage that exceeds current value and an interest rate that is much higher than current rates. Contact your mortgage broker to discuss whether you can qualify for the new HARP. For more information on HARP, go to http://www.makinghomeaffordable.gov or call (888) 995-HOPE (the number for HopeNow, a government-sponsored counseling organization that is a wonderful resource).
Wednesday, October 26th, 2011
Recently the Obama administration announced changes to the Home Affordable Refinance Program (HARP) that are aimed at helping homeowners refinance mortgages, even when there is no equity in their homes. Their goal is to help the millions of homeowners and prevent more foreclosures, but what is involved and will it really work?
Some of the changes to HARP include the following:
1. Fee reduction. Many of the fees associated with refinancing will be reduced.
2. Current loan to value cap on fixed rate home loans will disappear. This was the reason many homeowners could not take advantage of HARP initially, since the value of their homes had decreased significantly.
3. Reduced underwriting guidelines. Some of the changes almost hint at a stated income situation, with a verbal income verification…but we will have to wait and see the specifics when they are announced.
4. Appraisal changes. The new plan will have a valuation system for appraisals, called “automated valuation,” which will do away with the need for new appraisals, and hopefully avoid appraisal issues that have plagued refinancing in the past.
There are a few caveats, most importantly that the homeowner has to be current on their mortgage. The home also must be a primary residence, and borrowers will be able to shop rates with other lenders, not just the lender who currently holds their loan. More details will be revealed next month. Some of these changes sound promising, and I do believe that more homeowners will get to take advantage of the lower rates without these restrictions, but the big question is:
Will the new HARP really help the housing market?
I have to say no to this. While this is a nice plan to help some more people get into lower mortgages, the fact is that it does not shine the light on the bigger problem in real estate – homeowners who have fallen behind on their mortgages. The new HARP offers no help to these people, and their homes will likely turn into a big future foreclosure wave. The negative equity in these homes is so great that neighborhoods will continue to be effected by their foreclosures, with comparables continuing to drop.
The other big problem I see with the new program is that it has to be implemented by the banks. Although some banks, like Bank of America, claim to embrace the new program, chances are we will still face many hurdles from the banks with implementation. Banks are simply too scared to refinance many mortgages, and the re-default rate is high, making them risky.
While I think the new HARP plan can help some homeowners, I think it is just the beginning. I stand by my opinion that housing must be fixed if we ever want to see the economy improve. We need MUCH more than what HARP can do. We need to help the millions of people who are unable to pay their mortgages, prevent the wave of foreclosures down the road, and find ways to deal with the heavy inventory currently owned by the lenders that is not yet on the market. To do this, we need the cooperation of the major lenders in formulating plans to help these people.
What do you think?
Monday, July 25th, 2011
The government has played an integral role in the real estate market for a very long time. But lately there have been two diametrically opposed views – and many in between – as to whether it should continue to do so. I posed this question to agents and the responses were very interesting.
The pro-government view is that the government has contributed to making the market a better place, mostly for consumers. Programs to help people avoid foreclosure, get better rates on loans and be able to buy homes with little money down (buyers who otherwise would not be able to purchase), keeping buyers, sellers and homeowners safe from scams (like mortgage fraud – although the past has not proven this is 100% possible), and enforcing local and federal laws (zoning, anti-discrimination in housing) to help people and our neighborhoods.
Just as vocal are those who feel that the government has intervened too much (anti-government intervention views), causing the market to be in such a horrible state. They site programs that have failed to do much but cost taxpayers lots of money, bank scams due to lack of regulation, problems within the foreclosure market, as well as the looming possibility of a loan limit reduction, which many believe will decimate the market even further.
One respondent pointed out that the government has to be involved to some extent, as many laws designed to protect us are entwined with the real estate market – zoning laws, building codes and federal anti-discrimination in housing laws come to mind. I agree. The government needs to jump in here to enforce rules that will keep our neighborhoods strong and ownership protected. So maybe the question should be “how much should the government intervene?”
Mark Zandi, the Chief Economist for Moody’s Analytics, recently stated in a post that it may be time for the government to get more involved in housing. He sites three areas that would benefit: “(1) facilitating more refinancing, (2) delaying the impending reduction in conforming loan limits, and (3) supporting principal-reducing loan modifications more aggressively.” He believes the government should require Fannie Mae and Freddie Mac to provide more refinancings through the Home Affordable Refinancing Program (HARP).
The flip side of the coin is that the government, instead of enforcing oversight on government agencies like Fannie and Freddie, needs to back off and let the chips fall as they may. They say that if Fannie and Freddie fail, it could open the doors to privatization – new types of funding where corporations and private parties become lenders in the primary market. These folks believe housing will not recover until such a time. Of course, there are many viewpoints in between as well.
No matter where you stand on government intervention in real estate, there are valid arguments on both sides. The key is getting people in the know to get together and have dialogues, sharing ideas that could reasonably be implemented to make a difference in the market. I love posting heated questions like this to Realtors, because the ideas that spark from them are often good ones, smart ones, and show that a group of people really can come together and find ways to solve problems for the common good – maybe a lesson the federal government can take to heart. What do you think?
Friday, July 8th, 2011
Obama Administration Extends Foreclosure Programs for the Unemployed. Those who are unemployed and have an FHA loan will soon be given up to a year of forbearance on their payments, giving them time to find a new job before losing their homes. This announcement arose from the fact that many Americans are unemployed for more than three months, making the current forbearance period (4 months) unfair in giving the homeowner a chance to get caught up and not lose their homes. Missed payments, plus interest, will be added on to the back end of the loan. The new program will start August 1 and last for 2 years.
Loan Limit Changes are on the Horizon. Starting October 1, unless Congress decides to be realistic and prevent the change, federal conforming loan limit maximums will change from $729,750 to $625,500. In preparation for this some lenders, like Bank of America, have already stopped accepting applications for loans over the new limit. Those seeking higher loan amounts through Fannie, Freddie or the FHA will need to apply for non-conforming loans, which have higher interest rates. Many politicians, organizations and other industry-related entities have been hard at work to prevent these changes, which they believe (and I agree) will be bad news for the already-injured housing market, pushing a recovery further into the future. Let’s hope these changes are prevented.
San Diego County Property Assessment Values Rise. For the first time since 2008 county property values have risen, and albeit a small amount (0.51%), it is still positive news for San Diego’s housing market. The only cities that did not see assessed value increases were Carlsbad, Chula Vista and Imperial Beach. The average a homeowner will have to pay due to the increase is about $260.
Bill Calls for Merger of Fannie Mae and Freddie Mac. The struggle to do away with Fannie and Freddie continues, and the latest news comes from a California Republican, who wants to merge the two into a government-held corporation. Freddie, Fannie (who own or guarantee 56% of all home loans in the U.S.) and their cousin Ginnie Mae back the majority of mortgage loans on the market – if they were not around there would likely not be any mortgages available now. Debaters have been arguing on whether to keep them under government control or sell them and get the government completely out of the mortgage market. This new option throws another log in the fire. I am sure the debate about what to do with Fannie and Freddie will continue.
Government Still Toying with Idea of Mortgage Servicer Oversight. Again, the government is announcing that it plans to start regulating mortgage servicers. Citing the risk of consumer harm with the current system (you think?), the Consumer Financial Protection Bureau plans to put the choke collar on these firms. The power to impose these restrictions on non-bank servicers, who are not subject to federal banking regulations, was provided by last year’s Dodd-Frank Act. Details are still in the works so it will be interesting to see what transpires. If you are a buyer and are planning on applying for a loan, I highly suggest you speak with your mortgage professional right away.
Big Banks Modifying More Loans (but not in the way we hope). Big banks have been modifying, or attempting to modify, more loans. But the interesting part is that they have been doing so of their own volition – contacting those borrowers who are not yet late with payments, but who pose a risk of future default. While this seems like a great idea in theory, many borrowers who have tried to get modifications complain that it doesn’t help those who reach out to the lender for help – modifications that should be granted are not, while those that shouldn’t (not yet in default or borrower hasn’t contacted lender yet) are granted. It’s frustrating for people who are honestly trying to work out a plan to stay in their homes. I think the lenders need to address those who have stepped up and asked for help before contacting those who have not…a “deal with what is in front of you NOW, and worry about the future in the future” concept. What do you think?
Saturday, July 2nd, 2011
Home Prices Show Slight Increase Heading into Summer. San Diego home prices rose slightly in April over compared to March, 0.4%, ending a four-month price dip across the county. Prices were still lower than they were the same time a year ago, and analysts claim the rise is due to the start of the spring/summer buying season.
Median Market Time for San Diego County Homes Rises. San Diego County homes showed an increase in median market time in May, up to 70 days, according to Realtor.com, lower than the national average of 92 days. Normal market time in the county is about 50-60 days. Median market time is the average time a home is listed on the market. In these more challenging times it is imperative to start a home sale at the right price, so speak with your agent about area comparables, amenities, condition and location of your home and neighborhood to attain the best price and attract buyers.
Half of pending properties in California are short sales or REOs. This may come as no surprise to those who follow the market, and it is great news for buyers. A recent study by the California Association of Realtors found that 28% of buyers who bought property last month purchased REO (lender-owned, or post-foreclosure) properties, and 19% of pending homes sales last month were short sales. The good news, aside from the fact that this inventory is being sold (leaving the market to push toward normalcy), is that these properties are priced lower than traditional sales, allowing the buyer to get a great deal.
Oversight Mandated for National Banks. As part of the regulatory settlement for the robo-signing scandal, the Office of the Comptroller of the Currency (OCC) has announced new rules by which all national banks under it’s supervision must adhere. The rules basically require the banks to assess their own foreclosure management processes by September 30, 2011. Banks are also ordered to suspend foreclosure proceedings while working with homeowners on possible loan modifications (this is big news)…although the languages does state “when possible.” Hmmm. There are a slew of other rules as well, so let’s hope this will be a start to lender oversight.
Fannie and Freddie Offer Deals to Save Buyers Money on Home Purchases. Fannie Mae and Freddie Mac are sweetening the price of homeownership by offering great deals to buyers. Sitting on over 200,000 foreclosed homes combined across the country, these two companies are eager to dispose of their inventory, so if you are a new homebuyer (sorry folks, no investors allowed) you could be eligible for up to 3.5% of the home price paid in closing costs. They are also rewarding your real estate agent with a $1200 bonus. FYI: to qualify for these programs the home must close escrow by October 31 for Fannie homes and September 30 close dates (with contract dates no later than July 31) for Freddie homes. For more information go to http://www.homepath.com/ (Fannie) or http://homesteps.com/ (Freddie).