Home Appraisals
Reappraising Home Appraisers
Thursday, August 20, 2009
After being blamed for helping to inflate home values during the housing boom, the appraisal business is again coming under fire.
Squeezed by a drop in fees, some appraisers are compensating by driving long distances to handle more assignments. Their wanderings are raising questions about whether they know enough about the neighborhoods to accurately assess the value of homes — which has implications for both home buyers and owners.
New Regulations — Refinance up to 125% Loan-to-Value
Refinance Rules Expanding to 125% Loan-to-Value
By: Diana Olick, CNBC Real Estate Reporter / 01 Jul 2009
”Homeowners refinancing their mortgages through loans backed by government agencies will be able to borrow up to 125 percent of their homes’ value under new regulations enacted Wednesday.
The rule changes, part of the government’s attempts to restore housing affordability and stem the foreclosure crisis, apply to loans backed up by Fannie Mae and Freddie Mac.
Previously, homeowners could borrow up to 105 percent of their home’s value. The new loan-to-value ratio is set up at 125 percent in a further effort to address those mortgage holders who owe more than their homes are worth.”
Major points of Obama’s new plan to fight the mortgage crisis.
President Barack Obama on Wednesday unveiled his plan to fight the home mortgage crisis and pledged up to $275 billion to help 9 million families suffering from falling home prices and unaffordable monthly payments.
“The plan I’m announcing focuses on rescuing families who have played by the rules and acted responsibly: by refinancing loans for millions of families in traditional mortgages who are underwater or close to it; by modifying loans for families stuck in sub-prime mortgages they can’t afford as a result of skyrocketing interest rates or personal misfortune; and by taking broader steps to keep mortgage rates low so that families can secure loans with affordable monthly payments.”
“Here is how my plan works:
“First, we will make it possible for an estimated four to five million currently ineligible homeowners who receive their mortgages through Fannie Mae or Freddie Mac to refinance their mortgages at lower rates.”
“Right now, Fannie Mae and Freddie Mac—the institutions that guarantee home loans for millions of middle-class families—are generally not permitted to guarantee refinancing for mortgages valued at more than 80 percent of the home’s worth. So families who are underwater—or close to being underwater—cannot turn to these lending institutions for help.”
“My plan changes that by removing this restriction on Fannie and Freddie so that they can refinance mortgages they already own or guarantee. This will allow millions of families stuck with loans at a higher rate to refinance. And the estimated cost to taxpayers would be roughly zero; while Fannie and Freddie would receive less money in payments, this would be balanced out by a reduction in defaults and foreclosures.”
“I also want to point out that millions of other households could benefit from historically low interest rates if they refinance, though many don’t know that this opportunity is available to them—an opportunity that could save families hundreds of dollars each month. And the efforts we are taking to stabilize mortgage markets will help these borrowers to secure more affordable terms, too.”
“Second, we will create new incentives so that lenders work with borrowers to modify the terms of sub-prime loans at risk of default and foreclosure.”
“Some sub-prime lenders are willing to renegotiate; many aren’t. Your ability to restructure your loan depends on where you live, the company that owns or manages your loan, or even the agent who happens to answer the phone on the day you call.”
“My plan establishes clear mortgage financing for the entire mortgage industry that will encourage lenders to modify mortgages on primary residences. Any institution that wishes to receive financial assistance from the government, and to modify home mortgages, will have to do so according to these guidelines—which will be in place two weeks from today.”
“And under this plan, lenders who participate will be required to reduce those payments to no more than 31 percent of a borrower’s income.”
“Third, we will take major steps to keep mortgage rates low for millions of middle-class families looking to secure new mortgages.”
“Today, most new home loans are backed by Fannie Mae and Freddie Mac, which guarantee loans and set standards to keep mortgage rates low and to keep mortgage financing available and predictable for middle-class families. This function is profoundly important, especially now as we grapple with a crisis that would only worsen if we were to allow further disruptions in our mortgage markets.”
“Fourth, we will pursue a wide range of reforms designed to help families stay in their homes and avoid foreclosure.”
“My administration will continue to support reforming our bankruptcy rules so that we allow judges to reduce home mortgages on primary residences to their fair market value—as long as borrowers pay their debts under a court-ordered plan. That’s the rule for investors who own two, three, and four homes. It should be the rule for ordinary homeowners too, as an alternative to foreclosure.”
Read the full text of President Barack Obama’s speech on home mortgage crisis posted by CNBC.com
US May Start Subsidizing Some Mortgage Payments
“The Obama administration is said to be near a plan to lower costs for homeowners with problem loans, reports CNBC’s Diana Olick.”
Preventing further home collapses the US government is planning a new program to subsidize mortgages for troubled homeowners. They are talking about standardized loan modification eligibility test even before a homeowner becomes delinquent, before a foreclosure process. Currently, you must be at least 90 days behind on your mortgage payments to qualify for modification.
Treasury is going to put 50 billion dollars towards attacking the foreclosure problems. It can be some form of mortgage buy-down. For example: You can not afford to pay your current mortgage payment $2,000 due to a hardship. But you can afford to pay $1,400. Government will come and use 50 billion dollars to share with the bank the difference $600. .
CNBC News:
“I’ve talked to all the major servicers — both the big bank ones and the big independent ones — and they are all ready to go, they’re chomping at the bit,” Lockhart, the director of the Federal Housing Finance Agency, said. “The other thing they’re asking for standardization.”
Under the plan being mulled, homeowners would have to make a case of hardship to qualify for new loan terms.
Housing policymakers weighed but have for now shelved one plan that would have seen the government stand behind low-cost mortgages of between 4 and 4.5 percent, sources said.
Lockhart said that policymakers are eager to prevent a large drop in home values from their current, deflated levels.” Read more…
$550 Billion Disappeared in “Electronic Run On the Banks”
Rep. Paul Kanjorski of Pennsylvania, The Capital Markets Subcommittee Chair, explains C-Span how the world economy almost collapsed in a matter of hours. “It would have been the end of our political system and our economic systems as we know it.”
On 09/15/08 the Federal Reserve told Congress members about a “tremendous draw-down of money market accounts in the United States, to the tune of $550 billion dollars.” According to Kanjorski, this electronic transfer occured over the period of an hour or two.
Rep. Paul Kanjorski said: “The Treasury opened its window to help. They pumped a hundred and five billion dollars into the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts, and announce a guarantee of $250,000 per account so there wouldn’t be further panic and there. And that’s what actually happened. If they had not done that their estimation was that by two o’clock that afternoon, five-and-a-half trillion dollars would have been drawn out of the money market system of the United States, would have collapsed the entire economy of the United States, and within 24 hours the world economy would have collapsed.”
Provided by RealHistoryChannel
The Biggest Housing Decline Since 1974
by Yahoo Finance
Thursday January 22, 2009, 2:21 pm EST
Article “Jobless claims surge, housing starts tumble”
“…For the whole of 2008, housing starts plunged 33.3 percent, the biggest decline since 1974, while permits plummeted 36.2 percent, also the largest fall since 1974.
Analysts reckon that the economy might not emerge from its current slump unless the housing market, the source of the financial and economic turmoil, stabilizes.
The housing market crash has reduced household wealth, causing a sharp decline in consumer spending, which accounts for about two thirds of U.S. economic activity.
“These are awful numbers. The U.S. economy cannot emerge from recession unless home prices and sales stabilize and builders begin to break new ground,” said the Economic Outlook Group’s Baumohl.
U.S. mortgage applications dropped last week, as a jump in home loan rates sapped demand for refinancing, the Mortgage Bankers Association said on Thursday.
Average 30-year mortgage rates jumped 0.35 percentage point in the week ended January 16 to 5.24 percent, after touching the lowest level in the history of the trade group’s survey, which dates to 1990.
Separately, data from a U.S. housing regulator showed home prices accelerated their decline in November, falling 1.8 percent after dropping 1.1 percent in October.
The National Association of Home Builders said on Wednesday U.S. home builder sentiment sagged in January to its lowest since records started in 1985.” Read more…
News Release by Fannie Mae
News Release by Fannie Mae
December 15, 2008
Statement by Brian Faith, Managing Director
Communications on National Tenant Policy
“Fannie Mae is finalizing a new policy that will allow tenants in Fannie Mae-owned foreclosed properties to stay in their homes if they can make their rental payments. For tenants who would prefer not to enter into a lease, we will continue to offer monetary support for the transition to a new residence as an alternative option.
Fannie Mae currently has a tenant eviction and foreclosure sale suspension in place through January 9, 2009. The new tenant policy will go into effect prior to the end of the suspension period. The goal of the suspension is to ensure that no renters are put out of their homes during this period. We have notified our attorney and broker networks to cease all eviction-related communications and proceedings during the suspension period. We estimate that 7,000-10,000 families have been able to stay in their homes as a result of the foreclosure and tenant eviction suspension.
We’ve been using the suspension period to fully implement the recently announced Streamlined Modification Program and to review and revise many of our policies and procedures. We’ve announced a new Trust agreement effective January 1, 2009 and new guidelines for servicers to enable earlier intervention with delinquent and at-risk borrowers. In conjunction with our regulator, FHFA, we will continue working to fully support the market and undertake efforts aimed at keeping people in their homes.”
Fed Cuts Rate to a Range of Zero to 0.25 Percent
Fed reduces benchmark rate to as low as zero
Tuesday December 16, 6:41 pm ET
In strong step to fight worsening economy, Fed cuts key interest rate to zero for first time
The Fed’s action was unprecedented in the central bank’s 95-year history, and Wall Street embraced it. The Dow Jones industrials, which had been up about 120 points ahead of the Fed announcement, finished the day up nearly 360, a gain of more than 4 percent.
For the first time, the Fed created a target range for its funds rate, putting it at zero to 0.25 percent. That was a dramatic reduction from the previous rate, which was an already low 1 percent. The federal funds rate is the interest that banks charge each other for overnight loans.
The radical action underscores the breathtaking deterioration in the U.S. economy and the stability of the financial system this fall, and even since Fed policymakers last gathered in late October.
For years, cutting the funds rate had been the Fed’s most potent weapon for snapping an economy out of trouble. But the recession, which economists say began a year ago, seems to be worsening despite all the steps taken so far.
The move “will go down in the annals of Fed history,” declared Stephen Stanley, chief economist at RBS Greenwich Capital. “I nominate this one to be called the `Who Could Ask for Anything More?’ statement. The Fed is throwing everything in its arsenal.”
There was fresh evidence of the economic danger Tuesday before the Fed announcement. Housing starts for November plunged by almost 19 percent, the most in a quarter-century.
And consumer prices fell by a record 1.7 percent in November, the second straight monthly decline, raising fears the nation is in a dangerous bout of deflation — a widespread, prolonged decline in prices that would take a bite out of personal income and corporate profits and do further damage to the already pummeled housing market. The Fed’s lower rates could help prevent deflation from taking hold.
At the heart of the economic crisis are credit and financial problems that have made worried banks reluctant to lend to customers — regardless of how cheap money has become.
At the same time, fearful Americans, watching jobs evaporate and their investments crumble, have sharply cut back on spending, including on big-ticket purchases such as homes and cars that typically require financing.
The Fed hopes lower borrowing costs will entice people and businesses to spend more, helping the economy. Citing “weak economic conditions,” the Fed said it expected to keep its funds rate at “exceptionally low levels … for some time.” Read more…
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