The real estate blog.

In surprise move, Fannie Mae has reversed its policy on down payments in declining markets. The earlier policy move forced home buyers to put extra money down, 10%, to buy a home.

The new policy puts the down payments at 3%-5%, though mortgage insurers won’t do 97% loans any more.

Washington-based Fannie (FNM, Fortune 500) says the move is part of its effort to help resuscitate the flagging mortgage market.

This actually makes a little bit of sense as declining markets become a self-fulfilling prophecy, especially if loans are harder to get. This is the first sign of credit loosening in the mortgage markets.

On a related note, I’m getting feedback from buyers and real estate agents in Las Vegas that there is a buying frenzy on bank owned homes. One
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If you’re looking for a no money down loan for financing a mortgage, the gift money loophole still exists. An article by Forbes discusses the practice when it comes to FHA loans -

You probably thought nothing-down mortgage loans disappeared in the wake of the American subprime lending crisis, which has ensnarled much of the world in a credit crunch.

They didn’t. Even more surprising, many Americans can still buy homes with nothing down thanks in large part to the federal government and a legal loophole that lets builders and bankers ensure a steady stream of asset-challenged borrowers for taxpayer-insured loans.

FHA allows gift funds from certain sources to be used by borrowers to cover the down payment. The upfront mortgage insurance premium (MIP) is automatically
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MSN ran a Slate story on the rising anecdotes, yet statistically unproven trend of people who can afford their mortgage payments, but choose to turn in their keys because of home depreciation. These are called “ruthless” walk aways in that this is a strategy that is chosen by the borrower instead of forced on them by the lender. There is a bit of a difference.

I got a call yesterday from a woman in an economically hard hit part of the Rust Belt. Here’s her situation:

She’s retired on a fixed income and bought a home two years ago. She put 50k down. The home has cost her more than she expected because of property taxes and utilities. She’s now looking at a short sale, not because she can’t afford the payments, but because she couldn’t afford the maintenance.

Her
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Two recent real estate reports show Utah’s real estate market is considerably weaker than a year ago, but home prices continue to appreciate. A report out yesterday on April’s home sales in Salt Lake show a volume decline of 33%, but a price increase of 2%. This is reflective of other areas of the country that showed a decline ahead of us.

The Salt Lake Board of Realtors is optimistic about these numbers:

But Realtor officials said Tuesday they believe that any downturn here will be comparably shallow and short-lived.

Board president Jillinda Bowers said April was the third consecutive month in which home sales increased in the county. Last year, sales started to slip in the summer, with January’s total of 634 an eight-year low for monthly sales. April’s total of 972 units sold is up from 934 in March and 746 in February.
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In an email inadvertently sent as a reply, instead of a forward, Countrywide(CFC) CEO Angelo Mozilo passed the following message on to a borrower seeking a payment workout:

Angelo_Mozilo@countrywide.com wrote: This is unbelievable. Most of these letters now have the same wording. Obviously they are being counseled by some other person or by the internet. Disgusting.

The response was publicized by the LA Times and is now all over the news. Different interpretations are being assessed as to what is “disgusting”…the borrowers hardship letter, or the fact the borrower could find a sample hardship letter online.

I think the disgusting factor is that Mozilo could even make this mistake. Further, his response is that of the old guard, unfamiliar, or in denial, that
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Beginning July 14th, FHA will now utilize risk based pricing for mortgage insurance, giving borrowers with better credit lower closing costs for the upfront premium. The monthly premium will increase by 1 basis point.

The current upfront premium of 1.5% will be dropped to 1.25% for borrowers with the middle FICO score above 600. For borrowers below 559, the premium will increase to 1.75%. Borrowers in between the two markers will remain the same. For loan to values above 97% which is most common, the premiums increase further…up to 2.25% for the worst credit with the highest LTV. The monthly premium for high LTV goes up to .55% which is considerably lower than conforming mortgage insurance.

This change in policy will reduce costs for borrowers with decent credit, but
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It’s interesting how different a story can sound based on the use of one word. “Commission” sounds like payment for expertise, but “kickback” sounds dirty.

Consider a recent article by CNN about the changes mortgage brokers are having to make because of the industry downturn. The article claims -

Instead, brokers pocketed kickbacks from banks in return for selling borrowers unnecessarily costly loans.

I’m not here to defend the practices of some unscrupulous mortgage brokers over the past few years. As a profession it is going away. I think it is unfair for the media to paint the entire industry as using kickbacks. It’s not true. It is a commission, a fee for service. If the media is going to call yield spread a kickback, they should also call service release
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Ever notice any super human creature have some weakness that with the proper knowledge applied can defeat it? Superman had kryptonite, Dracula has the wooden spike, werewolves a silver bullet.

It appears 100% financing is the kryptonite of Utah’s housing market as well as the other remaining strong markets like those in the Pacific Northwest and North Carolina.

Utah’s average home price fell 1.2 percent in the first quarter to $272,503 from the same period last year, a new report shows.

The Utah Association of Realtors on Friday released home-sale data for the first quarter.

While some counties showed big gains, others showed losses. Salt Lake County showed minuscule appreciation after a sales slowdown of almost 50%.

The slowdown began last summer
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First quarter numbers show the country is not technically in a recession, though parts of the country sure feel like it.

The bruised economy limped through the first quarter, growing at just a 0.6 percent pace as housing and credit problems forced people and businesses alike to hunker down.

The country’s economic growth during January through March was the same as in the final three months of last year, the Commerce Department reported Wednesday. The statistic did not meet what economists consider the definition of a recession, which is a contraction of the economy. This means that although the economy is stuck in a rut, it is still managing to grow, even if slightly.

The Fed just announced its rate decision affecting short term rates and took the key overnight
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Know thyself and you’ll know what kind of home to buy.__________________________________
Granted, in real estate sales we do everything for a buck. If you don’t believe me, ask your friendly neighbourhood Realtor (but ask him politely). So, in the spirit that uniquely characterizes the lives of charming professionals such as myself, the real estate community routinely goes back in time throughout the annals of the history of mankind in an effort to discover new elements of the human psyche, which can help achieve exactly this goal: doing everything for a buck.
This time around someone (the competition, but I am not going to reveal who since I do not particularly care to be sued for libel) has dug up the word of none other than Heraclitus of Ephesus, who said: “Know Thyself”. Not only did he say that, he also carved it into stone literally by having it inscribed in the forecourt of the Temple of Apollo at Delphi.
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