From the Daily Record:
FORECAST 2010: Is real estate turning the corner?
Real estate professionals around Morris County agree: If the next 11 months are anything like the last few months, 2010 could be a pretty good year.
Overall, 2009 will go into the books as another tough one for real estate in Morris, New Jersey and most of the United States. But a close look at last year’s residential real estate statistics in Morris County shows there was a measurable turnaround from the second to the third quarter, followed by more improvement in the fourth quarter.
“The second half of the year was much better than the first, and the end of the year was even better,” said Jacqueline “Jackie” Scura of Re/Max First Choice Realtors in Parsippany. “This year is starting off a little slow. There’s not a lot of inventory out there right now. But we expect more people will be listing their homes soon and, if they are priced right for the market, they should sell in a reasonable amount of time.”
Adding to the perceived January market chill, Scura said, is that the reduced inventory includes “a lot of homes that have been sitting there for a long time.”
While the number of homes for sale hasn’t dropped to the level of the boom years in the early 2000s, when homes were often claiming multiple bids within days of their listing, the recent reduction of inventory could be good news for some home-sellers.
“But make no mistake, this is not a seller’s market by any means,” said Lyle Wolf, Realtor associate and co-owner of Exit Realty Gold Service in Mountain Lakes.
…
With the recession and credit crunch still weighing down the market in 2009, it’s no surprise that nearly all municipalities in Morris County, echoing the national trend, experienced further annual drops in average home-sale price. The average number of days on the market per home increased.
From the Press of Atlantic City:
Maybe last year wasn’t so bad for southern New Jersey’s real estate market
The widespread belief that real estate had a terrible 2009 is being disproved by the data for the southern New Jersey market released this week.
Compared with the prior year, sales were almost even in Atlantic and Cape May counties, and significantly higher in Cumberland County. Prices fell, but by single digits, and the time it took to sell homes remained about the same.
Real estate offices said the second half of 2009 in particular was strong, and the momentum is continuing into this year.
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Prudential Fox & Roach’s HomExpert Market Report this week showed 551 home sales in Cumberland County in 2009, 21 percent more than the year before. The median price fell 8.3 percent to $154,000, and the average days a house spent on the market increased from 104 to 113.
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In Atlantic County, home sales fell 1 percent to 2,602 last year, according to the market report. The median price dropped 9.6 percent and days on the market inched up from 115 in 2008 to 119 in 2009.
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In Cape May County, which isn’t covered by the market report, the county Association of Realtors reported this week that 2009 sales dropped 1 percent to 1,879. The median price fell 8.1 percent to $296,000 and average time on the market was unchanged at 221 days.
…
For all of southern New Jersey, the report said sales were down 1.4 percent in 2009 and the median price declined 8.3 percent to $199,000 from the prior year.
From the Star Ledger:
N.J. home sales may be adversely affected by FHA guidelines
Measures intended to protect government-backed loans from widespread defaults and foreclosures could have an adverse effect on the state’s housing sales, according to industry experts.
Earlier this month, the Federal Housing Authority announced increased minimum down payments for borrowers with low credit scores and higher mortgage insurance premiums for those that take on the loans.
The restrictions will take effect in the spring and early summer.
The latest moves are part of a strategy outlined last year to shore up the FHA’s loan portfolio, which is increasingly under pressure from defaults and delinquencies.
“Now most of our transactions are FHA, so the word on the street is that there are all of these changes,” said Jonathan Kessler, president of the Hunterdon Somerset Association of Realtors. “FHA loans have often been the only means for some buyers to purchase property.”
He said changes made to the government-backed program could hurt deals.
Indeed, last year, the FHA endorsed roughly 59,000 loans in the state — about 55 percent more than in 2008.
…
These new stricter guidelines, however, are a necessity, said Peggy Yanuzzelli, president of the Middlesex County Association of Realtors.
“Some agents may look at it as a decrease in buyers, with no money and lower credit scores,” she said. “But for the future economy, this has to be done.”
From the NY Times:
Builders Reassess the Market
THE number of new-housing permits issued statewide in 2009 did not even reach 12,000. The last year the tally was that low: 1945, when New Jersey was still mostly cow and corn country.
If the housing crisis was finally over and the overall economy was headed toward recovery, it would still take at least two years for housing starts to recoup, according to market analysts.
“Traditionally, after past recessions, housing starts have doubled within two years,” said Jeffrey G. Otteau, whose Otteau Valuation Group provides advice on state real estate trends. “Because of the severity of this recession, though, there may be lingering wounds.”
Yet even in the face of these sobering numbers, several builders of multifamily projects have forged ahead — some actually building, others planning on it as soon as weather permits.
Their reasons are varied, based on interviews with developers of several large projects. Some asserted that their condominium developments held special appeal despite the general slowdown in sales; others said they had used the “down time” of the economic crisis to reconfigure plans and now felt that they understood the changes in buyers’ requirements.
From HousingWire:
Treasury Changes Guidelines for Getting Borrowers into HAMP
The U.S. Treasury Department and the Department of Housing and Urban Development (HUD) changed guidelines on how servicers introduce borrowers into the Home Affordable Modification Program (HAMP) to go into effect June 1, 2010.
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Servicers began ramping up efforts to gather more documents after the November HAMP numbers revealed a little more than 31,000 permanent modifications. Herb Allison, the assistant secretary for the Treasury said that at the program’s outset, the goal was to reach as many people as possible and obtain documentation during the trial period.
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Effective for all trial period plans with effective dates on or after June 1, 2010, a servicer can only evaluate a borrower for HAMP after receiving an initial package that includes a request for modification and affidavit (RMA) form; the Internal Revenue Service (IRS) 4506T-EZ form, which gives servicers the ability to pull the borrower’s tax return; and two pay stubs from the borrower for proof of income.
From USA Today:
Want a loan modification? Bring documents
Homeowners applying for mortgage modifications will soon have to provide paperwork upfront showing that they qualify.
The new documentation process is aimed at getting homeowners more rapidly into permanent modifications with lower monthly payments.
…
To accept homeowners into the program, many lenders accepted borrowers by taking proof of income over the phone. Getting the documentation needed to get into a permanent modification then took time, lengthening the process.
Under the change, homeowners will provide the documentation upfront.
“Were there some struggles with documentation? Absolutely. Are we learning from those lessons? Absolutely,” says Phyllis Caldwell, who heads the Treasury’s Homeownership Preservation Office.
…
Wage earners will need:
•Two pay stubs.
•An electronic form that allows a servicer to pull up a tax return online.
•A request for modification that includes a hardship affidavit.
From the WSJ:
Paperwork Eased in Loan-Modification Program
The Obama administration is trying to simplify the paperwork for people seeking lower home-mortgage payments in an effort to avert more foreclosures.
The Treasury outlined new guidelines Thursday aimed at streamlining requirements for mortgage relief under the administration’s Home Affordable Modification Program launched a year ago.
The guidelines specify that borrowers must provide three items to loan servicers, the companies that collect mortgage payments: a form requesting a loan modification, authorization for the servicer to seek tax information from the Internal Revenue Service and evidence of income, such as two recent pay stubs. Previously, some servicers have asked borrowers to fax in copies of their tax returns. Borrowers sometimes couldn’t find the needed tax forms or complained that servicers repeatedly lost material faxed to them.
The previous documentation requirements were “somewhat overwhelming” for some borrowers, says Morgan McCarty, head of mortgage servicing at Regions Financial Corp., a banking company based in Birmingham, Ala.
From the WSJ:
December Chilled New-Home Sales
Demand for new homes in December fell, as cold weather and continuing joblessness put a chill on hopes for a housing-market recovery.
Single-family home sales fell 7.6% from November to a seasonally adjusted annual rate of 342,000, the Commerce Department said Wednesday, though it noted the drop was within the margin of error. December’s reported drop followed a 9.3% plunge in November. Meanwhile, on a positive note, home inventories fell last year, compared with 2008, but prices fell, too.
“The new-home market continued to wilt late in 2009,” Mike Larson, an analyst at Weiss Research Inc., wrote clients. “The buyers who are willing and able to buy are flocking to cheaper, distressed, ‘used’ homes.”
Home sales for all of 2009 dropped sharply, by 22.9% to an unadjusted 374,000, from 2008’s 485,000, as the industry struggled after collapsing from its multiyear boom.
…
“Overall, the housing-market recovery remains fragile,” BNP Paribas’s Anna Piretti wrote to clients. “Tight credit conditions, ongoing deleveraging, a likely increase in mortgage rates and a 10% unemployment rate all point to sluggish housing demand after the tax-credit program expires.”
…
Regionally, December new-home sales were mixed, rising 42.9% in the Northeast and 5.2% in the West, falling 41.1% in the Midwest and 7.3% in the South.
The New Jersey Home Price Index Tracker has been updated to include:
* November S&P Case Shiller (Aggregate, Tiered, Condo)
(click to enlarge)
(click to enlarge)
FHFA (Formerly known as the OFHEO) Home Price Index
HPI (Includes Refis) - Peaked in Q1 2007 and is down 12.42% from peak
Purchase Only - Peaked in Q2 2006 and is down 11.88% from peak
S&P Case Shiller NY Metro Commutable Area Home Price Index
Low Tier (Under $284606) - Peaked in October 2006 and is down 23.3% from peak
Mid Tier ($284606 - $417722) - Peaked in September 2006 and is down 20.6% from peak
High Tier (Over $417722) - Peaked in June 2006 and is down 16.2% from peak
Aggregate (Overall Market) - Peaked in June 2006 and is down 19.7% from peak
Condo-Only Index - Peaked in February 2006 and is down 14.4% from peak
NY Metro Area Aggregate Year over Year Changes
Nov 08 -8.74%
Dec 08 -9.22%
Jan 09 -9.73%
Feb 09 -10.32%
Mar 09 -11.66%
Apr 09 -12.36%
May 09 -11.87%
Jun 09 -11.49%
Jul 09 -10.09%
Aug 09 -9.30%
Sep 09 -8.53%
Oct -7.75%
Nov -7.12%
From the Courier Post:
Home sales drop beyond expectation
Sales of existing homes, plumped up by government incentives in November, melted 16.7 percent in December, the largest month-to-month drop in 40 years. The steep decline, reported Monday by the National Association of Realtors, was worse than the 10 percent drop predicted by economists.
Overall, prices fell dramatically in 2009, declining 12.4 percent nationwide to a median of $173,500, the largest decline since the Great Depression.
…
But the most recent numbers for New Jersey — for sales in the third quarter — indicate prices are still softening.
“The good news is that homes are still moving, even if the price points are lower,” said Allan Dechert, president-elect of the NJAR and co-owner of Ferguson-Dechert Real Estate in Avalon.
In Burlington County, the median sales price for an existing, single-family home slid 7.4 percent compared to the same quarter a year ago, from $247,000 to $228,000.
In Camden County, the median price inched down 3.3 percent, from $203,200 to $196,400. In Gloucester County, the median price shed 10.8 percent, from $232,100 to $207,100.
From the Philly Inquirer:
Philadelphia-area existing-home sales down in December
The end of the first housing tax credit, as expected, took its toll on sales of existing homes in December, national and regional data show.
Sales fell about 35 percent in December from November in the eight-county Philadelphia region, according to a Prudential Fox & Roach HomExpert report.
Nationally, the month-to-month drop was 16.7 percent, according to the National Association of Realtors.
…
Some economists question whether the extended credit will jump-start the real estate market as much as the first one did.
“So far, the second credit appears to be having a minimal effect,” said IHS Global Insight economist Patrick Newport.
“Mortgage applications to purchase homes [the four-week moving average] are near their lowest level since 1997,” he said. “Applications are down despite the fact that mortgage rates, which are at historically low levels, are likely to go up during 2010.”
Newport said he believed sales would be weaker in 2010 than in 2009.
Prices fell 3.2 percent year-over-year in the eight-county Philadelphia region, but that reflects the continued presence of first-time buyers in the market, with or without the tax credit, snapping up lower-priced homes.
From the WSJ:
Existing-Home Sales Plunge
Home sales plunged in December, raising fresh concerns over the housing market’s ability to recover when government support winds down.
Sales of previously owned homes fell 16.7% from November to a 5.45 million annual rate, the National Association of Realtors said Monday, after a looming tax-credit deadline pushed buying decisions into previous months. The drop brought the pace of sales down to the lowest level since August.
The government’s first-time home-buyer tax credit was initially scheduled to end Nov. 30, and there was a race to finish deals before it expired. But the tax credit was eventually extended until spring, complemented by an additional tax break for repeat buyers.
For all of 2009, there were 5.16 million home sales, up 4.9% from 4.91 million in 2008. It was the first annual sales gain since 2005.
Although economists expected Monday’s report to show declining December home sales, few thought they would fall so sharply. The decline called into question the sector’s ability to bounce back.
“We have a very fragile housing system,” said Michael Carey, an economist with Calyon Securities in New York. He worried that as the government withdraws support from the housing market, prices could begin slipping again. That would put more homeowners into the position of owing more on their mortgage than their home is worth and could lead to another wave of foreclosures.
…
Regionally, December sales fell 19.5% in the Northeast, 25.8% in the Midwest, 16.3% in the South and 4.8% in the West.
From the WSJ:
Tishman Venture Abandons Stuyvesant
A group led by Tishman Speyer Properties has decided to give up the sprawling Peter Cooper Village and Stuyvesant Town apartment complex in Manhattan to its creditors in the collapse of one of the most high-profile deals of the real-estate boom.
The decision comes after the venture between Tishman and BlackRock Inc. defaulted on the $4.4 billion debt used to help finance the deal. The venture acquired the 56-building, 11,000-unit property for $5.4 billion in 2006—the most ever paid for a single residential property in the U.S. The venture had been struggling for months to restructure the debt but capitulated facing a massive debt load and a weak New York City economy that has undercut rents and demand for high-priced apartments.
The property’s owners signaled they would be unable to reach a deal with lenders and instead decided to allow creditors to proceed with what amounts to an orderly deed-in-lieu of foreclosure, which means a borrower voluntarily gives the property back to lenders to avoid a foreclosure proceeding.
From the NYT:
Huge Housing Complex in N.Y. Returned to Creditors
The owners of Stuyvesant Town and Peter Cooper Village, the iconic middle-class housing complexes overlooking the East River in Manhattan, have decided to turn over the properties to creditors, officials said Monday morning.
The decision by Tishman Speyer Properties and BlackRock Realty comes four years after the $5.4 billion purchase of the complexes’ 110 buildings and 11,227 apartments in what was the most expensive real estate deal of its kind in American history.
The surrender of the properties, first reported by the Wall Street Journal, ends a tortured real estate saga that saw the partnership make expensive improvements to the complex and then try to rent the apartments at higher market rates in a real estate boom. But a real estate downturn and the city’s strong rent protections hindered those efforts, leaving the buyers scrambling to make payments on loans due for the properties, which have been a comfortable harbor for the city’s middle class since they opened in the late 1940s.
From the APP:
More offices, shopping centers delinquent on loans
The Whiting Town Center is a sprawling complex on Lacey Road in Manchester whose tenants include restaurants, doctor’s offices and a Super Foodtown that serves as an anchor. There are a few empty stores, but nothing that would signal distress.
Until you talk to one of the tenants.
“The middle class, they’re just dead in the water,” said Cathy Lada, owner of the flooring store, A Lada Flooring. “We’re basically (living) paycheck to paycheck right now. There’s no security.”
With tenants hurting and unemployment rising, banks are bracing for another round of shaky loans, this one to borrowers who own property such as shopping centers and office buildings.
…
“Definitely we’re seeing more stress on our commercial real estate loans and our borrowers,” said Bruce Dansbury, chief operating officer of Sun Bancorp, the Vineland-based parent company of Sun National Bank. “It’s there. It’s real. You can see it as you ride around. You see vacancies in shopping centers and office buildings. It seems like everywhere you go there is a “For Lease’ sign.”
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The result: About 4.6 percent of commercial mortgages in the region that includes Monmouth and Ocean counties were at least 30 days past due during the third quarter of 2009, up from 2.1 percent during the fourth quarter of 2008 and mirroring the national rate, according to Foresight Analytics, an Oakland, Calif., research firm.
From the Star Ledger:
N.J. commercial landlords tack on incentives to fill vacant space
The deserted office building off Prospect Plains Road in Cranbury looks as if it could still be occupied, with 42 acres of manicured landscaping and traffic signs advising employees where to park.
But it’s been more than two years since Aetna Insurance moved out of the space at 1 Continental Drive, leaving the 500,000-square-foot building empty as the day it was built.
The agency trying to lease the five-story building has dropped the price to $4.95 a square foot, or about $10 less than the 2006 price. The agency tells potential tenants that a square foot of premium office space off exit 8A of the New Jersey Turnpike — where the building is located — is now as affordable as a “golf ball” or “hamburger.”
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At the end of last year, about 34.7 million square feet of office space was on the market in central and northern New Jersey — up from 31.5 million available square feet at the end of 2008, according Grubb & Ellis, a commercial real estate firm.
But that doesn’t include the “shadow market” of space that landlords are simply not bothering to try to lease, said Matt Dolly, managing director of research in the New Jersey office of FirstService Williams.
Dolly said with that space could amount to hundreds of thousands of extra square feet.
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The jobless rate in New Jersey has now hit 10.1 percent, with more than half of those out of work “knowledge-based workers,” or those that would likely work in offices, according to an estimate from the Edward J. Bloustein School of Planning and Public Policy at Rutgers University.
And the glut of commercial office space on the market has dropped asking prices to similar lows. The average asking rate for Class A space — the highest quality — has dropped to its lowest level in more than five years — $28.80 a square foot in the northern and central parts of the state, according to Grubb & Ellis.
From the Press of Atlantic City:
Malls struggling to fill vacancies in tight economy
The row of blacked-out stores at Heather Croft Square gives the impression of a retail ghost town. For more than 20 years, the big draw at the shopping center on Tilton Road in Egg Harbor Township was a Superfresh, until it closed in 2007.
The impending recession gutted the center. A dollar store went bust, a lending company left and a dinette and bar stool supplier shut down. Larry Delany watched helplessly as his neighbors’ stores suffered.
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The alarms were ringing for retail mall and strip center operators a year ago, when major chains such as Circuit City and KB Toys prepared to go out of business after a weak holiday shopping season.
In April, Chicago-based General Growth Properties Inc., which operates four malls in northern New Jersey, filed for one of the largest commercial real estate bankruptcies ever after struggling with a $27.3 billion debt load. Its malls remain open as it works to restructure its debt.
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In September, Taubman Centers Inc., of Bloomfield Hills, Mich., reported a negative cash flow with its luxury shopping mall in Atlantic City, The Pier Shops at Caesars, and said it did not think it could pay off its $135 million mortgage. A company spokeswoman said last week that a plan to turn over the property to lenders is still in negotiations.
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The Shore Mall in Egg Harbor Township was reportedly in jeopardy of closing after its anchor, Boscov’s, filed for bankruptcy protection in 2008 and threatened to go out of business. It has since come out of bankruptcy and is adding staff.
The department store’s survival was especially critical after Value City closed that same year. Shore Mall, which opened in 1968, is made up primarily of smaller, independent retailers as opposed to the national chains with greater access to capital.
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Streb said the region remains “overmalled,” and weaker properties that don’t upgrade face difficulties. He ranks malls with a letter grade, and said modern, fresher properties such as the Cherry Hill Mall can be considered an A. He gave the Hamilton Mall in Mays Landing a B, and the Shore Mall a C.
“The A malls are going to survive,” he said. “It’s the B malls that should upgrade, and the C malls, if they don’t do anything, can potentially close.”
From the Record:
Home prices fell 13% in Bergen and Passaic in 2009
Prices of single-family homes fell by an average 13 percent in Bergen and Passaic counties in 2009, according to data from two multiple listing services.
The average price of a single-family home sold in Bergen County in 2009 was about $553,000, down 13 percent from 2008. The median price — the point at which half the prices are above and half below — was $435,000, a 10.3 percent decline from a year earlier. The lower median value reflects the fact that more homes were sold at the more affordable end of the market.
In Passaic County, the average price in 2009 was $330,187, down 12.6 percent.
From the Star Ledger:
N.J. sees 29 percent, year-end jump in residential foreclosure filings
As the real estate market struggles to gain its footing back, the state’s number of residential foreclosure fillings jumped 29 percent at year’s end from 2008, according to data from the state judiciary.
Homeowners saw a record number of foreclosure filings in 2009. The housing crisis as well as the jobless rate — of 10.1 percent, which recently eclipsed the national rate in December — wreaked havoc on New Jerseyans who were forced into loan modifications, short sales, and even foreclosure.
Last year, banks filled 62,775 filings, up from 48, 698 in 2008.That’s a far cry from 2006, when only about 23,000 notices were filled.
The parts of the state with the widest margins of fillings increase were Atlantic and Bergen counties — 55 percent and 48 percent, respectively.
And the counties that saw the smallest jumps were Cumberland and Essex Counties — 11 percent and 12 percent increases, each.
From the Philly Inquirer:
Mortgage foreclosures way up in N.J.
New Jersey’s residential-mortgage foreclosure rate shot up 29 percent from 2008 to 2009, with a South Jersey county among the hardest hit, according to statistics released yesterday.
The number of commercial foreclosures, meanwhile, was up 68 percent, from 875 to 1,471.
The counties with the biggest increases in residential foreclosures were Atlantic, Bergen, and Sussex.
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The foreclosure crisis will not get better any time soon, said James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University.
The crisis started when lenders sold exotic mortgages to people who neither understood nor could afford them. Now the crisis is rapidly moving through the middle class.
“There were a lot of sharks in the cities getting people to buy existing housing at inflated prices, and people were in over their heads. You had all those scandalous mortgage products,” Hughes said.
And he said there is a “shadow inventory” of foreclosures. At President Obama’s request, many banks have held back on publicly filing foreclosure actions, but that won’t last.
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Many residents find their mortgages are higher than their home values, putting them under water.
“Joining into the aftereffects of predatory lending, you now have middle-class households who have lost their jobs and stretched themselves too thin,” Hughes said.
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The courts have been feeling the bump since at least 2007, when filings went up from 24,857 to 36,360.
Kevin Wolfe, chief of civil practice in the Administrative Office of the Courts, said there was a five- to six-month backlog in reviewing cases.
From the Record:
NJ unemployment rate hits highest mark in nearly 33 years
In a blow to hopes of a quick recovery, New Jersey lost 2,300 jobs in December and unemployment rose to 10.1 percent - the highest level in nearly 33 years, figures released Wednesday show.
The job loss takes the number of jobs lost in 2009 to 90,100, about the same as in 2008, according to the monthly employment report released by the New Jersey Department of Labor and Workforce Development.
New Jersey’s unemployment rate is now 0.1 of a percentage point higher than the national rate of 10 percent. The state started the year with a rate of 7.3 percent.
From the Star Ledger:
N.J. unemployment rate rises to 10.1 percent
The New Jersey unemployment rate cracked the 10 percent mark in December after hovering just below it for several months.
The state lost 2,300 jobs, including 1,100 private-sector jobs, to bring the unemployment rate to 10.1 percent, up from 9.7 percent in November, and 6.8 percent in December 2008, the state labor department said today.
Manufacturing, construction and financial activities sectors lost the most jobs, while other sectors gained.
From the Philly Inquirer:
N.J. jobless rate rises, tops U.S. level
New Jersey’s unemployment rate rose in December to the highest in 33 years as employers in manufacturing, construction and financial services continued to cut jobs, the state said today.
Overall, New Jersey lost 2,300 jobs last month, boosting the unemployment rate to 10.1 percent, from 9.7 percent in November. December marked the first time since October 2006 that the state’s jobless rate was higher than the nation’s, which was 10 percent.
It is significant that the state’s total workforce - those employed and those looking for work - fell by 2,500 in December, which means those people stopped trying to find jobs.
Five of the 10 sectors in private industry reduced employment last month, four added jobs, and one was unchanged, the state Department of Labor and Workforce Development said.
The biggest cuts were made by manufacturers (5,400 jobs), construction contractors (2,400), and financial-service firms (1,700).
From the WSJ:
FHA to Lift Mortgage Insurance Fees
The Federal Housing Administration will announce more-stringent lending requirements and higher borrower fees on Wednesday to cushion against rising defaults and stave off the need for a taxpayer bailout of the agency.
The FHA, which has taken on a major role in the housing market during the economic downturn, doesn’t lend money to home buyers, but insures lenders against default on loans that meet FHA criteria. In exchange for that backing, borrowers who take out FHA-backed loans must pay an upfront insurance premium, currently set at 1.75% of the total loan amount. The premium can be rolled into the loan.
The FHA is set to raise that fee to 2.25%, the second increase in the past two years, according to people familiar with the matter. The value of the FHA’s reserves to cover losses has fallen to $3.6 billion, about 0.5% of the $685 billion in loans outstanding, down from 3% a year earlier. Congress requires the agency to maintain a 2% capital-reserve ratio. If the larger upfront fee had been in place last year, the FHA would have boosted its reserves by more than $1 billion.
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The FHA, which backs as many as half of all new loans in certain housing markets, has come under fire for insuring loans with little or no money down as home prices have plunged over the past three years. With its reserves falling, the agency has been forced to walk a tightrope between protecting taxpayer dollars and helping to facilitate the housing recovery.
The FHA will keep minimum down payments at the current 3.5% level for most borrowers. But the agency will require riskier borrowers with credit scores below 580 to make a minimum 10% down payment. While the FHA doesn’t have a credit-score cutoff, most lenders require a minimum 620 score.
Some housing analysts have pushed for higher down payments on FHA-backed loans, and a bill in Congress would raise down payments to 5%, from the current 3.5%.
Instead, the FHA will reduce the amount of money that sellers can kick in for closing costs to 3% of the sale price, down from the current level of 6%. The higher cap led to abuses where sellers “heavily marked up the purchase price,” says Lou Barnes, a mortgage banker in Boulder, Colo.
From the NY Times:
F.H.A. to Raise Standards for Mortgage Insurance
The Federal Housing Administration, which is supporting the housing market by insuring thousands of new mortgages every day, is expected to announce on Wednesday that it is tightening standards.
Borrowers who get an F.H.A.-insured loan will soon have to pay a higher initial insurance premium. The new premium will be 2.25 percent of the value of the loan, up from 1.75 percent.
Starting this summer, sellers will not be able to offer as much help to buyers to pay their closing costs. The maximum amount of assistance will drop to 3 percent of the value of the property, from the current 6 percent.
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For years, the F.H.A. operated largely out of the public view. But it has become a subject of controversy recently even as it has ballooned in size. Some of the agency’s critics want it to tamp down risk by insuring fewer loans; others think it should help the market by insuring even more.
As of December, the F.H.A. was insuring 5.8 million single-family residences that had a total loan balance of $750 billion. More than half a million of the loans were seriously delinquent and heading toward foreclosure.
Many of these troubled loans were made in 2007 and 2008 as the market was plunging.
From the Star Ledger:
Corzine passes real estate legislation
Two days before Gov. Jon S. Corzine was due to leave office he signed two pieces of real estate related legislation into law, according to a release.
The state’s housing crisis influenced state politicians to sponsor real estate laws that both benefit victims of foreclosures and buyers looking to take advantage of the down market.
The first measure now makes it legal for real estate brokers to pass some of their profits onto their clients.
Before this latest move, it was illegal for real estate agents to entice potential clients with the promise of a cash. New Jersey was one of 11 states that didn’t allow the incentive.
The act allows an individual real estate agent to decide whether to pay their clients or not, and stream lines business policies for some nationwide real estate brokerages.
From Bloomberg:
Loan Modification Recipients Fall Short, Drop Out
About 25 percent of homeowners who received trial loan modifications through President Barack Obama’s main foreclosure prevention plan are failing to keep up with their new reduced payments, the Treasury Department said.
At least 196,000 borrowers have missed some or all of their required payments, according to comments Treasury officials made on a conference call today and calculations from government data. An additional 115,000 homeowners who started trial repayment plans last year have either dropped out or been kicked out of Obama’s Home Affordable Modification Program, the officials said.
“None of these programs have really been a success,” said Vivek Sriram, a mortgage strategist for RBC Capital Markets in New York. “With the high unemployment rate, it’s tough to solve the problem because these people will redefault even if their loan terms are fixed.”
The U.S. has shed 7.2 million jobs since the recession began in December 2007, with almost half those losses occurring after Obama took office in January 2009. The mortgage program, which Obama said would target as many as 4 million Americans struggling to hold onto their homes, has successfully modified 66,465 loans as of Dec. 31, according to data released today by the Treasury.
From UPI:
Mortgage modification numbers still small
Only a few U.S. homeowners enrolled in a federal foreclosure prevention program have achieved permanent loan modifications, statistics indicate.
Data released Friday by the U.S. Treasury Department showed that only 7 percent of those in the Obama administration’s Making Home Affordable program have moved from its trial phase into a permanent loan modification — about 66,000 of the 850,000 homeowners enrolled, The Washington Post reported.
Government and industry officials have said the main reason is that many of the homeowners in the program’s trial phase have been unable to provide enough documentation to prove they qualify and are at risk, but housing advocates counter that in some cases, homeowners have indeed provided the necessary paperwork but are in limbo while waiting for their lenders to act, the Post said.
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