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Archives for October 2013

VIDEO: Existing-Home Sales Fall But Prices Rise

 

Existing-home prices are continuing to edge up across the country, but sales aren’t keeping pace. Here are five key indicators for the housing market from the National Association of REALTORS® ‘latest existing-homes report, which reflects September data:

  1. Home prices: The median price nationally for an existing home in September was $199,200, up 11.7 percent from a year ago. Home prices have had 10 consecutive months of double-digit year-over-year increases.
  2. Home sales: Sales of existing single-family homes dropped 1.5 percent in September to a seasonally adjusted annual rate of 4.68 million. However, sales remain 10.9 percent above year-ago levels. Meanwhile, existing condo and co-op sales dropped 4.7 percent in September but are 8.9 percent above year-ago levels.
  3. Distressed homes: Foreclosures and short sales accounted for 14 percent of September sales. That’s up from 12 percent in August. A year ago, distressed home sales made up 24 percent of the market. “Lower levels in the share of distressed sales account for some of the growth in median prices,” NAR notes. In September, foreclosures were sold at an average discount of 16 percent below market value; short sales were being discounted by an average of 12 percent.
  4. Inventory: Housing inventory in September held steady, with a 5-month supply at the current sales pace. NAR’s report shows that 2.21 million existing homes were available for sale in September. For-sale inventory is 1.8 percent higher than a year ago.
  5. Days on the market: The median time on the market for all homes was 50 days in September, up from 43 days in August but down from 70 days a year ago. Short sales were on the market for a median of 93 days in September; foreclosures were at 43 days. NAR notes that 39 percent of homes sold in less than a month in September.

SOURCE: Realtor Mag.

You Own the Home, Builders Own What’s Under It

Builders are increasingly retaining the mineral rights to homes they sell, according to a recent investigation by Reuters of county property records in 25 states. That means that while home owners own their homes from the ground up, the builders lay claim to what’s beneath the home, such as oil, natural gas, water, or other natural resources.

GasFrackingHome owners are often unaware that builders have retained mineral rights and are displeased when they learn that they don’t own the ground under their feet, Reuters reports. “Many worry about the potential health and environmental effects of fracking,” Reuters reports.

“This is a huge case of buyer beware,” says Lloyd Burton, professor of law and public policy at the University of Colorado-Denver. “People who move into suburban areas are really clueless about this, and the states don’t exactly go out of their way to let people know.”

In most states, sellers aren’t legally required to disclose to home buyers whether they are losing the mineral rights to a property, Reuters reports. Sometimes builders may flag it in sales contracts or deeds, but not all buyers review the paperwork closely.

Reuters’ investigation uncovered numerous builders engaged in the practice of retaining the mineral rights on homes, such as D.R. Horton, Ryland Group, Pulte Homes, and Beazer Homes.

Why do builders want to keep the mineral rights to a home? “The phenomenon is rooted in recent advances in extracting oil and gas from shale formations deep in the earth, fueling the biggest energy boom in modern U.S. history,” Reuters reports. “Horizontal drilling and the controversial practice of hydraulic fracturing, or ‘fracking,’ have opened vast swaths of the continental United States to exploration.” By keeping the mineral rights, builders stand to make a financial gain if “energy companies come calling,” Reuters reports.

SOURCE: Realtor Magazine

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Live and work in scenic Mackay, Idaho. The White Knob Motel and RV Park features 28 full RV hookups with 30 amp power, water, laundry and shower facilities.

For those who don’t like to “rough it” as much, there are 7 quaint motel rooms, some with kitchenettes.

The property sports the only pool in town with its own pool house with showers. This property is on over 10 acres, with room to expand.

Owner’s house is very comfortable and contains the office for the business and a 3 car garage. Extra large metal storage building for that extra overflow of equipment. Beautiful grounds off of the highway with scenic views.

Close to all the recreation Idaho’s Lost River Range has to offer.

VIDEO: Govt shutdown shuts off some expensive mortgages

The second week of the government shutdown is giving consumers and lenders second thoughts about the housing market. Lenders last week were giving assurances that they would use “work-arounds” for tax documentation on mortgage applications, but now the future is not quite as clear.

“As the government shutdown continues, we’ll continue to evaluate the circumstances,” said Tom Goyda, a spokesman for Wells Fargo, the nation’s largest lender.

Goyda said Wells Fargo is following guidance from Fannie Mae and Freddie Mac, which does not require IRS verification unless the borrower is financing multiple properties. If that is the case, the lender can close the deal without the verification but cannot deliver it to Fannie or Freddie without the IRS documents.

Jumbo loans (mortgages with values exceeding $417,000) are getting trickier, however. Some lenders will not do them at all without tax verification from the IRS. Others are delaying the process. They will all have to verify the tax information once the government opens again, and that’s a gamble. These loans are inherently riskier because most are held on bank balance sheets.

Wells Fargo is continuing to originate jumbo loans without tax document verification from the IRS. As for the risk it is taking on in doing so, Goyda said, “I can’t really speculate on that.”

“The industry is doing what it can to make the shutdown as seamless as possible, but some lenders are more conservative about it than others,” said Matthew Graham of Mortgage News Daily.

Loans backed by government insurance from the Federal Housing Administration (FHA) and loans through the Department of Veterans Affairs (VA) are largely not affected, as their processes are mostly automated or lenders have delegated authority to close the loans.

“Bottom line here: Loans that are anywhere close to ‘vanilla’ are moving through the system more or less as normal,” Graham said.

“Vanilla,” however, does not include loans needing flood insurance through FEMA, loans for self-employed borrowers or loans requiring Social Security number verification, he said.

Hardest hit by far is the Department of Agriculture home loan program. USDA loans, which are 30-year fixed with no down payment, make up less than 5 percent of the total mortgage landscape but are a favorite among first-time buyers and builders. As the so-called exurbs expand, more borrowers are qualifying for these loans. USDA is currently closed and not processing any loans.

“Some lenders are using this to advance competitive opportunity, rather than calling for an end to this, by advertising that they can close the loans if others cannot,” wrote David Stevens, CEO of the Mortgage Bankers Association, in an email over the weekend. “This disruption is negative for housing and the consumer and will only get worse as this extends.”

Stevens circulated an online ad sent to him by Premier Nationwide Lending, which touts “Good news for most of your borrowers!” The company said it has revised its policies to allow loans to be funded without IRS tax transcripts.

It noted that its policy is “short-term” and “temporary.” John Hudson, Premier’s vice president in charge of regulatory affairs noting that USDA loans are still shut down, and that one family he’s working with is “homeless” because of the shutdown.

Uncertainty in the mortgage market could not have come at a worse time. After a robust spring and summer sales season, housing was already beginning to slow down this fall, thanks to higher mortgage rates. Now concerns about the shutdown and the potential debt crisis have potential buyers pulling back yet again.

“Our September National Housing Survey results show that the improvements in consumer housing attitudes witnessed in recent months softened ahead of the government shutdown,” said Doug Duncan, chief economist at Fannie Mae. “Americans’ awareness of policy uncertainty leading up to the Oct. 1 shutdown and the pending debt ceiling debate appears to have grown as indicated by an apparent cautionary holding pattern in overall consumer housing and personal finance sentiment.”

SOURCE: CNBC

Banks Scale Back on Crucial Step in Home Buying

Banks are reportedly losing favor of mortgage pre-approvals, which are often viewed as an important first step in the home buying process. Mortgage preapprovals are a written commitment from lenders outlining the loan amount and interest rate that home buyers qualify for.

They give buyers an indication of how much they can afford on their home purchase, as well as show sellers their commitment to purchase. But last year, only 29,912 preapprovals resulted in mortgages from the top 25 mortgage lenders — down from 101,626 in 2007, according to the Federal Financial Institutions Examinations Council.

Preapprovals accounted for 4 percent of the purchase mortgages that lenders originated last year, and preapprovals did not precede any of the mortgages issued to home buyers by 14 of the 25 largest lenders last year, according to the council.

“The popularity of preapprovals is quite low,” says Mike Lyon, vice president of mortgage operations at Quicken Loans. Quicken loans’ preapprovals are down 43 percent from 2007. Why are preapprovals losing favor, particularly as competition has been heating up in many housing markets?

Some banks say that they are holding off on the preapproval until seeing the home appraisal. Until then, they prefer a prequalification, which tells borrowers the average size of loan they can qualify for based on stated income and based on an average of mortgage rates. It’s not as formal of a commitment for a loan.

Preapproval are usually binding for two to three months. Some banks, such as Bank of America and Chase, say they are doing more pre-qualifications than pre-approvals.

Chase, for example, says it gives buyers a “conditional approval” that usually lasts 90 days, but does not provide a written commitment. Chase says it often waits to give a written commitment until after verifying borrowers’ income, employment, and the home’s appraisal.

Bank of America also says it waits to approve a buyer until a home is appraised and the borrowers’ finances are fully reviewed. Some analysts say that while preapprovals are showing signs of losing some favor, the federal data may not be a fully complete picture of how big of a decrease in prequalifications.

The federal data relies on lenders submitting data on their preapprovals, and some lenders say their preapprovals don’t meet the federal government’s formal federal definition.

What Shutdown Means For Real Estate

Congress has failed to approve a Continuing Resolution (CR) providing funding for most government operations. Therefore, spending authority for most of the government expired at midnight on Sept. 30, 2013. Until legislation providing for funding is signed into law, many offices and programs of the federal government are now shut down.

This means many, but not all, government programs, including some that impact federal housing and mortgage programs, have been suspended or slowed due to the lapse in government funding. The Office of Management and Budget (OMB) requires each agency to have contingency plans in place. The information below is based on NAR staff review of agency agency contingency plans for the current shutdown and past experience with previous shutdowns and near-shutdowns.

Latest Status Information

(as of Oct. 3, 2013 2PM ET)

Internal Revenue Service (IRS)
The IRS is closed and has suspended the processing of all forms, including requests for tax return transcripts (Form 4506T). While FHA and VA do not require these transcripts, they are required by many lenders for many kinds of loans, including FHA and VA, so delays can be expected if the shutdown is protracted. We have received indications that many loan originators are adopting revised policies during the shutdown, such as allowing for processing and closings with income verification to follow, as long as the borrower has signed a Form 4506T requesting IRS tax transcripts. On loans requiring a Form 4506T Fannie Mae and Freddie Mac have also adopted relaxed provisions allowing closings but subject to tax transcript verification before the GSE’s purchase the loans.

Social Security Administration (SSA)
The Social Security Administration is closed and has suspended most customer service functions. According to the SSA Contingency Plan, verifying Social Security numbers through the Consent Based SSN Verification Service will also be suspended during the shutdown, a further complication for mortgage processing. As with IRS income verification, policies vary among lenders, with many choosing to exercise forbearance during the shutdown period subject to subsequent verification. Fannie Mae and Freddie Mac have also adopted policies to allow for closing subject to subsequent verification and before GSE purchase of the loan.

Department of the Interior – Bureau of Indian Affairs (BIA)
BIA has announced that there will be no processing or recording of property transactions on Leased Indian Tribal Land during the government shutdown.

Additional Status Information

(as of Oct. 1, 2013 7AM ET)

Federal Housing Administration
HUD’s Contingency Plan states that FHA will endorse new loans in the Single Family Mortgage Loan Program, but it will not make new commitments in the Multi-family Program during the shutdown. FHA will maintain operational activities including paying claims and collecting premiums. Management & Marketing (M&M) Contractors managing the REO portfolio can continue to operate. You can expect some delays with FHA processing.

VA Loan Guaranty Program
Lenders will continue to process and guaranty mortgages through the Loan Guaranty program in the event of a government shutdown. Expect some delays during the shutdown.

Flood Insurance
The Federal Emergency Management Agency (FEMA) confirmed that the National Flood Insurance Program (NFIP) will not be impacted by a government shutdown, since NFIP is funded by premiums and not tax dollars. Changes to the flood insurance program scheduled to take effect on Oct. 1 will be implemented as scheduled.

Rural Housing Programs
For the U.S. Department of Agriculture programs, essential personnel working during a shutdown do not include field office staff who typically issue conditional commitments, loan note guarantees, and modification approvals. Thus, lenders will not receive approvals during the shutdown. If the lender has already received a conditional commitment from the Rural Development office, then the lender may proceed to close those loans during the shutdown. A conditional commitment, which is good for 90 days, is given to a lender once a USDA Underwriter approves the loan. If a commitment was already issued, the funds were already set aside and the lender may close the loan at its leisure. If Rural Development has not issued a conditional commitment, the lender must wait until funding legislation is enacted before closing a loan.

It is important to note that the traditional definition of “rural” for qualifying communities for assistance will be continued in effect during the shutdown.  We expect that language to continue the current definition will be included in whatever funding measure is eventually enacted.

Government Sponsored Enterprises
Fannie Mae and Freddie Mac will continue operating normally, as will their regulator, the Federal Housing Finance Agency, since they are not reliant on appropriated funds.

Treasury
The Making Home Affordable program, including HAMP and HAFA, will not be affected as the program is funded through the Emergency Economic Stabilization Act which is mandatory spending not discretionary.

SOURCE: National Association of Realtors

Government shutdown could slow housing recovery

The fight may be in Washington, but the effects of the government shutdown will ripple through every neighborhood in America—without a fully functioning government, an already tight mortgage market may become even more prohibitive. It is exactly what the housing recovery does not need.

“This is going to be very disruptive to the mortgage industry and pretty much result in a freeze of the pipeline,” said Craig Strent, CEO of Bethesda, Md.-based Apex Home Loans. “New loans can be taken, but without IRS and Social Security number verifications, [they] will not be able to proceed to closing.”

Shut Down - Closed for BusinessAfter getting burned badly in the housing crash, most lenders now check everything on a borrower’s loan application. It has become standard to verify tax returns as a quality control measure, according to Strent. If the IRS is closed, it will not process any forms, including tax return transcripts, so the loan applications will be stalled. For government workers themselves, it’s even worse, because they will likely be unable to verify their employment on a mortgage application.

The Federal Housing Administration, which represents about 15 percent of the mortgage market, the lights will still be on, but the staff will be reduced.

This is going to be very disruptive to the mortgage industry and pretty much result in a freeze of the pipeline

“The Office of Single Family Housing will endorse new loans under current multi-year appropriation authority in order to support the health and stability of the U.S. mortgage market,” according to a post on the federal Housing and Urban Affairs’ website. Lenders with “delegated authority” will be able to go on making FHA loans. That is about 80 percent of FHA lenders. They will also be able to get FHA case numbers through the usual on-line service. The FHA will continue to collect insurance premiums from borrowers during a shutdown as well.

“The FHA program can weather a shutdown as long as it doesn’t last too long,” said Guy Cecala of Inside Mortgage Finance. “But a shutdown could also seriously impact FHA’s ability to police lenders and loan quality.”

The shutdown, if lengthy enough, could hit home mortgage refinances as well, delaying rate locks and resulting in costly extension fees.Now What?!!

“What could happen is that our customers could be put in a hold status and then subject to interest rate gyrations that are very likely to occur between the time a government shuts down and reopens,” said David Zugheri of Houston-based Envoy Mortgage.

Of course, mortgage rates could move lower if investors head to the relative safety of the bond market and drive yields down. Mortgage rates follow loosely the yield on the 10-year Treasury.

“Rates may go up this week if…Friday’s job’s report stays on the schedule,” said Matthew Graham of Mortgage News Daily. “Markets would have to defend against the possibility of a strong report reigniting October taper expectations.”

If the shutdown lasts for a few days or even a week, the immediate effects on mortgage availability will be minimal. It’s the message this whole battle has already sent that is already doing much of the damage.

“It certainly won’t help housing. Among other things, it is likely to spook would-be homebuyers,” said Cecala.

Consumer confidence is a key component of the housing recovery, and while rising home prices have helped, more uncertainty in the economy can only hurt.

“Some home-buying consumers are reluctant to buy because of the uncertainty,” said Brad Hunter, chief economist at Metrostudy. “They see the factions in Congress as ‘daring’ each other, with extremely high stakes. People are not especially comfortable making the biggest investment of their life when the government seems to be unable to solve important problems.”

SOURCE: CNBC