Real Estate Information

Getting a mortgage in 2010 is a little more complicated than it has been in the past due to the challenging economy and increased government regulation of the mortgage industry. Here are some of the changes that are taking place this year. 

New Good Faith Estimate

The US government has created a new version of the disclosure form known as the Good Faith Estimate (GFE). The old GFE itemized all your closing costs and illustrated your "cash-to-close" - the amount of cash you would need to bring to the closing if you are buying a home, or the net proceeds you would receive at the closing from a cash-out refinance. The new GFE lumps in your closing costs under certain categories instead of itemizing them, and does not illustrate your cash-to-close. Also, if the seller is paying closing costs or points on your behalf, this is not reflected on the new GFE. In other words, it will look as though you are paying these fees even though the seller is paying them.

New Appraisal Guidelines

Most mortgage loans these days are either insured by the Federal Housing Administration (FHA) or sold to Fannie Mae or Freddie Mac. This means that mortgage banks and brokers need to follow the rules set by Fannie, Freddie, and the FHA. In 2009, Fannie and Freddie adopted new rules surrounding the home appraisal process. In 2010, the FHA followed suit and implemented many of the same guidelines. What this means for you is that the appraisal process is going to be more stringent and inflexible, costly, and time consuming than it has been in the past.

In fact, many appraisals are now conducted by appraisers who may not live in your community, resulting in value estimates that may not agree with your own opinion of what your home may be worth. Also, many appraisals now go through multiple layers of screening and are handled by Appraisal Management Companies, resulting in higher costs and fees. Finally, loan originators are prohibited in most cases from ordering appraisals or communicating with appraisers. Even so, it is important to keep in mind that an appraisal is simply somebody's opinion of what your home would sell for in today's market. You and I are entitled to disagree with the appraiser and have a different opinion, but the lending guidelines that we need to follow require us to use the appraiser's opinion when calculating your loan amount and strategy.

New Disclosure Rules

The US Congress has enacted some new laws, and the Federal Reserve Board has issued some new guidelines that could delay the loan process. For example, if the APR on your loan changes by more than 0.125% before the closing, the lender needs to issue new disclosure forms and give you time to review the new forms.

Here are just a few examples of what could cause the APR to change:

• You decide to lock in your interest rate or get a rate lock extension
• You decide to reduce your loan amount
• You are getting an adjustable rate mortgage and the index value changes
• Your credit score changes before closing, resulting in a higher rate or higher fees
• You decide to pay more or less points than what you initially requested

Higher Credit Score Guidelines

As stated above, most mortgage loans these days are either insured by the Federal Housing Administration (FHA) or sold to Fannie Mae or Freddie Mac. This means that mortgage banks and brokers need to follow the rules set by Fannie, Freddie, and the FHA - all of whom have issued stricter credit scoring guidelines. I know it sounds ridiculous, but if your credit score is less than 740 (gasp!) you may get hit with higher fees if your loan is being sold to Fannie or Freddie.

Fortunately, with our many years of experience we are able to work with you to evaluate your options and point out strategies and ideas for increasing your credit score and getting a great deal on your mortgage. Please contact us for more details and to find out how to obtain the best loan possible for your situation.

Amidst the high-profile news Monday about the administration’s actions to coax servicers into making more mortgage modifications permanent, the Treasury Department also laid out finalized guidelines for carrying out short sales under the Making Home Affordable program.

The administration is urging participating servicers to follow through with short sales as an alternative to foreclosure for those homeowners that don’t qualify for a reworked mortgage under the Home Affordable Modification Program (HAMP).

To entice servicers to accept a sale on defaulted properties for less than the outstanding mortgage balance, Treasury is offering incentive payments of $1,000 per completed short sale. Servicers will also receive $1,000 for each deed-in-lieu of foreclosure.

Subordinate lien holders will be paid to release their claims on defaulted properties, up to $3,000 of the short sale proceeds as long as the primary investor agrees to share the earnings, and for this concession, the investor will also receive up to $1,000 from the Treasury. For those second lien holders who want more than the $3,000 cap to relinquish their stakes, the Treasury said they can pursue a short sale outside of the federal program.

Homeowners who agree to a short sale or deed-in-lieu of foreclosure will get up to $1,500 to help with relocation, and must be “fully released” from any future liability, according to the guidelines.

The Home Affordable Foreclosure Alternatives Program (HAFA), as it is being called by the Treasury, was initially announced back in May, but was delayed because of concerns over legalities involved in the process and the rights of second lien holders to hold claim over the property. DSNews.com reported in October that the administration was readying guidelines for the program, and yesterday, they arrived.

In addition to solidifying incentive payments, the newly published procedures bar servicers from forcing short sale facilitating agents and brokerages to reduce their commissions as a prerequisite for approving the transaction.

Under the terms of the program, once a servicer determines a homeowner does not qualify for a modification, the servicer has a 30-day window in which the borrower must be considered for the HFHA program. Each participating servicer is required to develop a written policy, consistent with investor guidelines, that describes the basis on which the servicer will offer the HAFA program to borrowers.

Every potentially eligible borrower must be considered for HAFA before the borrower’s loan is referred to foreclosure or the servicer allows a pending foreclosure to sale to go through.

The servicer must assess the current value of the property, independent of the borrower and any other parties to the transaction. No payment for the valuation can be assessed in advance of the sale.

Borrowers who qualify for HAFA will be given pre-approved short sale terms before the property is listed, and once an offer is made, mortgage servicers have 10 days to approve or reject the sale.

The HAFA program becomes effective April 5, 2010, but the Treasury said participating servicers may elect to implement the program earlier.

CNN recently pegged Seattle as one of the top cities in the nation for a housing recovery. They are estimating a 3.8% INCREASE in prices by 2011, which may not sound like much, but many cities are showing no signs of gains or recovery over the next few years.

Since 2006, prices in Seattle have dropped 15.2%, which is roughly half the national average. You can read the full article here

The number of homes that are scheduled for foreclosure dropped in October, which marks the third straight month where foreclosure filings have decreased nationally.

Currently Washington state ranks 29th in number of foreclosures that are scheduled for auction. Foreclosure filings in King County are down over 6% from September, and foreclosures in the pipeline are down 22% year over year for Washington state as a whole.

According to this Seattle Times article, Nevada still "clocked in the nation's highest foreclosure rate for the 34th month in a row, followed by California, Florida, Arizona and Idaho. Rounding out the top 10 were Illinois, Michigan, Georgia, Maryland and Utah."

President Barack Obama signed a bill last week extending and expanding the federal tax credit. Now, buyers who have owned in their current homes for at least five years are eligible for tax credits of up to $6,500. First-time homebuyers — or anyone who hasn't owned a home in the last three years — would still get up to $8,000. To qualify, buyers have to sign a purchase agreement by April 30, 2010, and close by June 30.

The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible

Joint filers who earn up to  $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

The National Association of Home Builders have released a very helpful FAQ website about the tax credit which can be found here

Please see below for an excellent financial update from our friends at Pacific Capital Resource Group, Inc.

"The month in brief. Wall Street had a great September, concluding its best quarter in 11 years: last month, the Dow gained 2.3%, the S&P 500 3.6%, and the NASDAQ and Russell 2000 5.6%. The rally was substantiated by quite a few economic indicators, though question marks emerged in the real estate sector. The jobless rate climbed, but consumer spending and retail sales were also up. Gold prices touched $1,000 an ounce. The Federal Reserve held interest rates steady and decided to scale back its emergency auctions.
 
Domestic economic health. The stock market was rallying; would consumer spending also improve? As September closed, we learned that consumer spending rose 1.3% for August, while retail sales were up 2.7% for that month. Certainly the cash-for-clunkers program affected those numbers, but that is still the biggest monthly increase in personal spending in almost eight years (and the fourth straight monthly gain). With auto sales and gasoline purchases factored out, August retail sales were still up 0.6%. Of course, a fraction of those consumers were out of work - the jobless rate reached 9.7% in August.

Unsurprisingly, the Fed left interest rates where they were ... and it announced that it would wind down the scope of its emergency auctions of cash loans and Treasuries from $450 billion in September to $100 billion by January. It also said it would complete its program to buy $1.25 trillion in mortgage securities by March. The Fed's August Beige Book noted stability or improvement in 12 regional economies, with business climates "cautiously positive" in most of those regions.
 
As for consumer confidence, the Reuters/University of Michigan consumer sentiment survey climbed to 73.5 from August's 65.7 mark."

If you or anyone you know would like to take advantage of this limited time tax credit, please call us right away. Because of the Thanksgiving Holiday, you really need to be in your new home by the middle of November to be sure you can close in time. This just leaves a few weeks left to take advantage of this amazing opportunity!

For the 19 counties in the Northwest MLS service area, the median price for single family homes and condominiums that sold and closed last month was $275,945, down about 8.8% from last years sales price of $302,500. Since January, however, prices area-wide have edged up about 1.1%, with seven of the 19 counties notching increases.

This Forbes magazine article is predicting Seattle, San Francisco, San Diego and San Jose to see the highest percentage increases in home prices over the next five years, with Seattle seeing appreciation of over 30%.

King County's median household income in 2008 was $68,832, according to estimates by the state's Office of Financial Management. At that income level, buyers had easy accessibility to six geographic areas whose median home prices were between $248,450 and $290,500, a Seattle Times home-price analysis showed. But in 2007, when the market was sizzling, only one area — Auburn, where the median price was $266,750 that year — was considered affordable.

Year to date in King County, over 580 single family houses have sold for under $199,000! In all of 2007, only 108 houses in King County sold for less than $199,000. The selection is still out there as well, with over 270 homes currently for sale under the $200,000 mark.

Pending sales, which are homes under contract but the sale has not yet closed, jumped nearly 21% from a year ago! In fact, home sales are the highest they have been since August 2007. Inventory dropped more than 18% year over year, according to new figures from Northwest Multiple Listing Service.

Excluding condos, two sub-areas of King County notched gains of more than 40% for pending sales of single family homes – Southeast King County (up 40.4%) and the Eastside (up 42.5%).

We have been busy as well…we sold 9 homes this month alone! We are now accepting listings and we enjoy working with buyers. Please let us know if you hear of anyone who is thinking about buying or selling; we appreciate your referrals.

The commerce department just announced that building of single family homes went up 14.4% Nationally in June, which is the fastest rate of increase in 4.5 years! You can read the full CNBC article here.

Spurring on this activity is the historically low interest rates, currently at 5.20% for a 30 year fixed mortgage (well below that average of 6.63% just a year ago), as well as the First Time Home Buyer Tax Credit which expires November 30, 2009.

Locally, in the greater Puget Sound Region, we have seen prices increase the last 3 months in a row and sales are the highest they have been since August 2007. The median price for homes and condos in King County is $363,116, down 9.22% from $400,000 a year ago, and last month there were 2,083 properties sold.