Archives for October 2012

VIDEO: U.S. Housing Market Is Recovering – Wells Fargo

Anika Khan, an economist at Wells Fargo Securities LLC, talks about the outlook for the U.S. housing market. Purchases of new homes in August held close to a two-year high figures, from the Commerce Department showed today in Washington. Khan speaks with Mark Crumpton on Bloomberg Television’s “Bottom Line.”

Ben Bernanke’s Mortgage-Refi Nation

Well, that didn’t take long. It’s been less than a month since the Federal Reserve announced plans to buy $40 billion of mortgage-backed securities a month for as long as necessary to spur lending and boost employment. Since then, mortgage interest rates have fallen to the lowest level on record—the average 30-year loan stood at 3.53 percent as of Sept. 28—driving refinance applications to jump to their highest level since 2009, according to the Mortgage Bankers Association.

Borrowers are refinancing at an annualized rate of 22 percent, according to Lender Processing Services (LPS). At this rate, more than one in five borrowers will refinance over the next year. Borrowers who have at least 20 percent equity in their homes are even more likely to refinance. Among those homeowners, one in three will refinance in the next year if the current pace continues.

Refinancing is normally not an option for borrowers who owe more than their home is worth. But they’ve have been getting into the act this year, thanks to the Obama administration’s Home Affordable Refinance Program, which rewards banks for working with underwater homeowners. Since the start of 2012, there’s been a 65 percent increase in refis for borrowers who owe at least 20 percent more than their homes are worth; HARP now accounts for about a quarter of all refis.

With rates so low, some borrowers are taking out shorter-term loans that let them pay down their debt quicker. Gone are the days people take out cash when they refinance. In almost a quarter of all refinancings in the second quarter of 2012, homeowners ponied up cash to reduce the principal on their loans, according to Freddie Mac (FMCC). A further 59 percent kept their loan balance the same—the most ever on record.

Lower interest rates free up real monthly cash flow for homeowners. In the second quarter—before the Bernanke-induced drop in rates—the average refinancing cut the homeowner’s interest rate by 28 percent, the biggest reduction in the 27 years since Freddie Mac began tracking the data. That means a homeowner with a $200,000 loan would save about $2,900 in their first year, Freddie Mac says.

All this refinancing activity is fine for the economy—lower monthly costs could help boost consumer spending–but it’s not Bernanke’s real target. He said  at a press conference last month: “You get more benefit when people buy homes. … It’s the purchases of new homes that generate the construction activity, the furnishing, all those things that help the economy grow.” Though home sales are starting to rebound slowly, it’s still hard for people with less-than-stellar credit to get mortgages. So for now, while low interest rates may be relieving the consumer debt burden for some, their boost to the overall economy is limited.

SOURCE: Businesweek

 

Housing Alert: Short Sales May Be in Big Trouble

As lenders plow through a backlog of over five million delinquent mortgages, short sales are becoming an ever more popular escape route. A short sale is when the bank allows a home to be sold for less than the value of the mortgage. The bank takes the loss, but that loss is generally less than a more costly foreclosure.

The government has been pushing more short sales at Fannie Mae and Freddie Mac through financial incentives, and banks are streamlining the process. Short sales have been gaining so much steam, they actually surpassed sales of foreclosed properties last spring, according to LPS Applied Analytics’ Home Price Index. But all the progress that has been made could end abruptly.

A short sale is debt forgiveness. Debt forgiveness is taxable. In order to help the huge volume of troubled borrowers and promote more short sales, Congress in 2007 passed the “Mortgage Forgiveness Debt Relief Act and Debt Cancellation.” The debt forgiveness from a short sale or a mortgage principal reduction would no longer be taxable. That act is part of many Bush era tax cuts that expire at the end of this year. Without an extension, short sales would grind to a halt, as might mortgage modifications that involve principal reduction.

“Realtors believe if the legislation is not extended, households who are already struggling to pay their mortgages will be further burdened with tens of thousands of dollars in additional taxes that they probably can’t afford to pay because the IRS would count the cancelled debt as income,” said Jamie Gregory, a lobbyist for the National Association of Realtors.

Short sales and mortgage principal reduction are the foundation of the $25 billion mortgage servicing settlement signed early this year by the nation’s largest lenders and state attorneys general. As of the end of August, first lien principal reduction trial modifications were offered and begun for about 28,000 homeowners, totally approximately $3 billion of potential relief, according to the settlement monitor, Joseph A. Smith. Banks have granted $10.6 billion in consumer relief, which would include short sales. More than a quarter of a million short sales were completed in the first half of 2012, according to RealtyTrac.

So what is the possibility of congress extending the tax relief? One Hill-watcher puts it at 60-40. The Senate Finance Committee passed a package of tax extenders right before the recess, including a one year mortgage relief extension, but leadership in the House of Representatives has not figured out how it wants to handle these extenders. With the looming “fiscal cliff,” tax cuts are an increasingly tough sell. This particular extension does have bipartisan support, but that doesn’t always mean passage in Congress, especially around a presidential election.

“It could be an uphill fight to get this passed this fall, as it will likely get caught up in larger debate of over taxes, deficits and the financial cliff. But we believe that it is a helpful provision for distressed borrowers, as getting a tax bill on forgiven debt can be another punch in the gut for families who are already facing financial hardship,” says David Stevens, president and CEO of the Mortgage Bankers Association.

Rep. Jim McDermott (D-WA), who introduced legislation last March to extend the tax relief for three years said in a release, “Collecting federal income tax on relief intended for struggling homeowners is not only bad policy, but is simply wrong.”

With great uncertainty as to the fate of the tax relief, some say short sales could get a boost this fall. Borrowers and banks alike may rush to get in before the expiration, which could help boost overall home sales numbers.

SOURCE: CNBC

SHORT VIDEO: It’s That Time . . . Trailing of the Sheep Festival

Mark your calendars for the many wonderful events that are all part of this years Annual Trailing of the Sheep Festival. Memorable stories, music, food, hikes, and lots of history are just a few of the highlights.

This years festival is October 11 thru 14 in Ketchum & Hailey Idaho

For more information, schedule of events, photos and more, visit: http://trailingofthesheep.org/