It is regrettable that the recently-created Consumer Financial Protection Bureau (CFPB) doesn’t have an easily-pronounceable acronym like HUD or RESPA. That is too bad because the CFPB is a government entity that people in the real estate industry are going to be referring to – and dealing with – over and over again in the coming years. Would that its name rolled easily off the tongue.

CFPB will affect real estate financing in matters ranging from disclosures to underwriting to appraisal practices. And that’s just the real estate part. CFPB will also have its hand in the business of credit card companies, credit reporting agencies, automobile financing, payday lenders, and many others.

Many know that CFPB was in a kind of limbo during its beginnings, because there was a political stalemate over the appointment of its director. Recently, though, President Obama was successful in installing Richard Cordray in that position, and the agency has been a beehive of activity since then.

On February 13 the Bureau released a model form for mortgage payment statements. The form can be found on the CFPB web site at www.consumerfinance.gov. It is not a final version. Input from both consumers and industry representatives is solicited. It is anticipated that a final form, and rule, will be proposed this summer.

Creating a standardized, mandatory statement form was not just the idea of an eager-beaver employee at CFPB. Rather, it was mandated by the Dodd-Frank Act (Section 1420). That law specifies several items that must be in the statement, and it also provides that other information may be prescribed by CFPB in its regulations.

It may come as a surprise to some that there currently is no standardized requirement of mortgage payment statements. To be sure, many are similar, but there are no industry-wide standards.

Particularly noticeable about the proposed form is that, in the case of an adjustable rate loan, the monthly statement shows when the interest rate will be reset – even if the date is not imminent.

Also, the proposed form shows if there will be a prepayment, how much it will be, and when the penalty will no longer be imposed. (More than a few real estate agents can tell of deals gone awry because the seller was “sure” that they had no prepayment penalty.)

Also, in what is probably a departure from the existing norm, the statement shows the maturity date of the loan.

An important component of the proposed form is that it includes information for those in need of mortgage counseling or assistance. Phone numbers are provided. That was one of the requirements of the Dodd-Frank act, and is clearly a sign of the times.

Readers are encouraged to visit the CFPB web site and to look at the form, and to make any suggestions they might have. And, for those who are really interested in these sorts of things, take a look at the proposals for new loan disclosures to be made just before the time of closing. These are not for the faint of heart.

Published: February 21, 2012

Daily Real Estate News | Thursday, February 16, 2012

“Mom and pop investors” are trying to capitalize on a depressed real estate market in the hopes of one day being able to cash in. An article in USA Today highlights this new breed of small-scale investors who like to buy and hold properties, opposed to the high-dollar large investment firms that once dominated the real estate market who preferred to buy and flip their property investments.

For “mom and pop investors,” the strategy is to buy homes at rock-bottom prices, rent the properties out to cover all of the costs of home ownership for several years, and then one day sell the homes when prices recover.

“An unprecedented number of investors are looking into this,” John Burns, CEO OF John Burns Real Estate Consulting, told USA Today.

Investors purchased more than 26 percent of single-family and condos in 167 U.S. markets in the first nine months of last year, according to data supplied by Burns to USA Today.

For investors in the rental market, an 8 percent annual return is fairly normal, according to Burns. “That means that someone who buys a $100,000 property — and pays cash for it — makes $8,000 a year after expenses, including maintenance and taxes,” the USA Today article notes.

Of course, the threats of tenant and maintenance issues always has the potential to derail that potential profit, so investors need to be careful before jumping in, some experts warn.

Source: “Mom and Pop Investors Propping Up Home-Buying Market,” USA Today (Feb. 14, 2012)

Housing Chairman Continues His Fight to Help Underwater Homeowners

February 9, 2012

WASHINGTON, DC – U.S. Senator Robert Menendez (D-NJ), Chairman of the Senate Subcommittee on Housing, Transportation and Community Development, today introduced an innovative bill to keep families in their homes, despite their mortgage being worth more than their home.

“Unfortunately, far too many New Jerseyans are underwater on their mortgages and are all too familiar with the burden this brings.  When you owe more than your house is worth through no fault of your own, relief can be hard to come by.  More and more people are choosing to walk away, since they feel that’s their only viable option, which only exacerbates the problem,” Senator Menendez said.  “My bill aims to break this cycle and give homeowners the relief they are looking for by working with banks to find acceptable solutions for everyone.”

The Preserving American Homeownership Act is specifically aimed at homeowners who owe more than their house is worth (“underwater”), which is currently estimated to be more than 10 million properties and approximately 22% of all homeowners. On average, these homeowners owe anywhere from $40,000-$65,000 more than their home is currently worth.

Millions of homes are underwater currently because of the broad national decline in home values that has occurred since 2006, which can be seen here. Because of this, homeowners – whose home values declined through no fault of their own – are less likely to remain in their homes, further hurting the already fragile market, and banks are reluctant to reduce the amount owed to them (“principal”) because they will be losing income.

Senator Menendez’s bill seeks to help both parties – homeowners and lenders – by creating a program in which banks reduce the mortgage principal for eligible homeowners. In exchange, banks would be entitled to a portion of the increased value of the home down the road as home values increase

President Clinton recently outlined a similar plan during the National Retail Federation’s Annual Convention and Expo as reported in the American Banker. Clinton said: “The lender would, in effect, invest in the home so the banks would not have a bad debt on their books,” Clinton said. “The harsh way to do it is to foreclose on everyone now and turn everyone into renters – I hate that way.”

“We applaud Senator Menendez for introducing The Preserving American Homeownership Act,” said Richard A. Smith, president and CEO of Realogy Corporation, a leading global provider of real estate and relocation services headquartered in Parsippany, N.J. “This debt-for-equity arrangement offers a solution for qualified underwater homeowners to work together with their lenders to achieve a mutually beneficial outcome — avoiding the lengthy and costly process of foreclosure, offering the likelihood of appreciation to both parties and contributing to a stabilizing housing market.”

“I’m a prime example of how shared appreciation mortgage modifications can really help homeowners,” said Juliana Collins who benefited from this specific modification previously. “When my house depreciated $200,000 in less than 3 years, it was a nightmare that I was unable to refinance my way out of. This modification finally gave me the peace of mind that not only will my family and I get to stay in our home, but I also won’t have to work multiple jobs and risk my health to be able to afford a mortgage that’s underwater.”

Chief Economist at Moody’s Analytics, Mark Zandi, on shared appreciation mortgage modifications: “I think [they’re] an excellent idea. … I do think [it] is appropriate – that there should be shared appreciation of any principal write down … but I think given that we’ve got this issue for the next three, five, seven years, I think this is entirely appropriate to do. Hopefully we learn from this and this will be part of the tool kit going forward.”

This program is a responsible win-win for everyone: underwater homeowners receive relief on their mortgages, while banks agree to take a short-term reduction for a long-term gain as the housing market recovers.  In a similar program tested by a private mortgage servicer, almost 80% of homeowners who were offered the opportunity to participate chose to do so and had a re-default rate of only 2.6%.

Additional Details

• The principal balance of the loan would be reduced to 95% of the re-assessed value of the home and over a three-year period, provided the homeowner is able to make reduced payments, the principal balance would be reduced in 1/3 increments per year.

• In exchange, the bank would receive a fixed share (at most 50%) of the increase in the home’s value when the home is sold or later refinanced.  The share depends on how much the bank initially reduced the principal.  For example, if the bank reduced the principal by 20%, they would receive a 20% share of any later increase in the home price.

• Home values would be determined by independent third-party appraisers.

• Two pilot programs would be established by the FHFA and FHA for a length of two years for homeowner acceptance.

• Homeowners are eligible no matter how far underwater they are.

• Homeowners who are in default or foreclosure are eligible, but they must make timely payments on the modified mortgage going forward or they will not receive any principal reduction.

• Primary residences are eligible, but secondary residences and investment properties are not.

• If capital improvements are made to the home, homeowners will receive credit for the appreciation and banks will not receive a share of that appreciation.

Losing your home can be devastating to your credit, but you can buy again within as few as three years after a foreclosure or short sale.

It’s not surprising when you lose your home you also lose some self-esteem. Remember, there are millions of others in the same situation and there is hope.
Others will tell you seven to ten years must pass before you can buy again. At that time, uninformed people say, you’ll have to buy at high interest rates. That’s not always true.
If you file for bankruptcy, you can buy a home again as soon as two years after your bankruptcy is discharged.
If you rebuild your credit and maintain a healthy, on-time credit profile, you can take advantage of low down payment and low interest rate loans. The Federal Housing Administration (FHA) allows you to buy a home with as little as 3.5 percent down and take advantage of some of the best interest rates on the market.
FHA loans literally replaced the subprime brand, but came with federal backing.
You also may be eligible for first-time homebuyer programs that assist you with your down payment and closing costs. First-time homebuyer programs are not just for those who have never owned a home, but allow you to qualify if you have not owned a home in the past three years. Some private lenders, home owners and investors also may allow you to buy a home even sooner than the two- to three-year period, but it will cost you a higher interest rate and require a large down payment. With the housing market flat and many local markets still expected to see prices fall more, it is not a bad idea to spend the next several years cleaning up and re-establishing your credit. Good credit will allow you to buy a home with a minimal down payment and the lowest interest rates. If you lost your home to foreclosure or a short sale, don’t lose hope. Don’t hesitate. Begin today putting yourself in a good position to buy.

How to Fix your credit
• Rebuild your credit by making your monthly debt payments on time. Don’t ignore your remaining credit obligations during foreclosure or after losing your home. Your credit score gets a boost, in part, based on the number of positive accounts in your credit report. The more you have, within reason, the faster your credit score rises, even after losing a home.
• Pay down your credit cards but not to a zero balance. Your credit score gets a boost if you maintain a balance that is about 30 percent or lower than your credit limit. Keeping a balance reveals you can borrow money and pay it back on time. Don’t close out your credit cards because the longer your positive credit history, the more your credit score and your ability to buy a home will improve. Save money
• Most of today’s homebuyer programs require a down payment. FHA loans require 3.5 percent down — $3,500 for every $100,000 you borrow. You likely will have to pay closing costs, another 2 percent to 3 percent of the sales price. This is another $2,000 to $3,000 per $100,000. Do the math to determine how much you need to save each month, over the next two or three years, to have enough to cover your down payment and closing costs.
Don’t be pressured
• Buy only when you are ready. You didn’t lose your credit overnight. Likewise, it will take time to rebuild your credit and save for a down payment. Home buying deals will be available for years to come.
• Avoid adjustable rate mortgages (ARMs) and consider a 15- or 30-year fixed rate mortgage (FRM) that is a fully amortized loan so your payment and interest rate are fixed for the duration of the loan. Full amortization means each payment helps pay down the principal. When your loan term ends, so does the loan balance.
• Buy based on what you can afford, rather than a higher amount approved by the lender. You already know the risk of biting off more than you can chew. Lenders will pre-approve you based on your gross monthly income, but that does not consider taxes subtracted from your paycheck, food, clothing, utilities and other monthly obligations.
Know your comfort zone. Don’t over-extend yourself.

Most importantly, be patient. Contrary to many ads seen on the website, there is no quick fix to repairing your credit. It will take time, but will pay off in the end.

By AMY HOAK

A majority of Americans recently surveyed say now is a good time to buy a home. That’s no surprise, given that record-low mortgage interest rates and bargain home prices are boosting affordability.

But selling a home? That’s a different story.

According to 71% of the 1,000 people surveyed by Fannie Mae in December, now is a good time to buy a house. But only 11% think it’s a good time to sell.

That’s because sellers sense that even if the housing market and the economy continue to show signs of improvement in 2012, the good news likely won’t be good enough for buyers to return to the market in droves—even if they can buy a home for a steal.

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Lisa Haney

“For people to start buying in larger volume, they need to see home prices go up a bit,” says Ingo Winzer, president of Local Market Monitor, a firm that analyzes housing markets for bankers.

Many potential buyers also are waiting to see the jobs picture improve, which will give them confidence in the stability of their own employment, Mr. Winzer says.

Improvements Ahead

Still, various forecasts and surveys suggest better times for the housing market this year:

Sales of existing homes are expected to grow between 2% and 5% in 2012, according a recent forecast from Freddie Mac.

A recent survey of about 1,000 Re/Max real-estate agents found that 39% of agents think prices have hit bottom in their market, while almost 75% think home prices in their markets will have stopped declining by the end of 2012.

The number of improving housing markets rose to 76 in January, from 41 in December, according to the Improving Markets Index, from First American Financial Corp. and the National Association of Home Builders.

Nationwide, home prices are expected to be relatively flat in 2012, says Alex Villacorta, director of research and analytics at Clear Capital, a provider of real-estate asset-valuation data for financial-services companies. Indeed, 2012 seems to be a turning point before a healthier and sustained recovery in 2013, he says.

If You Can Hold Out

While now still may not be the perfect time to sell a home, it may be time for home sellers to get their places ready for a sale next year.

Of course, markets vary. Prices already are on the rise in some places, including parts of Florida, Washington, D.C., and Dayton, Ohio, Mr. Villacorta says.

But other markets—including Chicago, Atlanta, Detroit and Las Vegas—continue to be on a “downward slide,” according to a December report from Realtor.com.

Either way, holding out until next year could mean a quicker and more profitable sale.

“From a seller’s point of view, it’s still a little early, though tempting, to put the house up for sale and expect a lot of demand,” Mr. Villacorta says. “Unless there are circumstances that dictate they have to sell now, certainly waiting and tracking the markets a little bit more would be a more prudent thing to do.”

Still, some sellers have delayed their moving decisions for years now. For those champing at the bit to make a sale and move on with their lives, 2012 may offer glimmers of hope.

“There are a lot of people over the last few years that decided to put their life on hold,” says Budge Huskey, president of real-estate brokerage Coldwell Banker. Some now are saying, ‘I’ve waited long enough. I can’t put life on hold forever,’ ” Mr. Huskey says.

The market is finally nearing the point where people who don’t need to sell for financial reasons are starting to consider a move for lifestyle-related reasons, he says, such as a growing family that would be more comfortable in a larger home.

The good news for them: Inventory plunged to a 6.2-month supply in December, from a 12.4 month supply in July 2010, according to the National Association of Realtors. That means there are fewer sellers competing for buyers. (The month-supply figure is how long it would take to sell all the homes on the market now based on the current rate of sales per month. The higher the number, the more sellers there are looking for buyers.)

If You Can’t Wait

If you plan to sell a home this year, get the house in the best possible condition and price it to sell before it hits the market, Mr. Huskey says.

An appealing online listing, complete with quality photographs, is also crucial to bring traffic to your home.

“The buyer has the opportunity to prescreen all the homes online and see only the few that really shine online,” Mr. Huskey says, so a seller should do everything he or she can to get on a buyer’s shortlist of homes to physically visit.

Write to Amy Hoak at amy.hoak@dowjones.com

Amy Hoak is a reporter for MarketWatch. Read more at marketwatch.com.

Selling your home isn’t easy and when the economy is in a downturn it can be even more difficult.. difficult, but not impossible. You can make selling your house a little easier by making some sound decisions such as hiring the right agent and choosing a realistic price for your home. Here are some things to look at when looking to sell your home.
Pricing is crucial, if your house is overpriced it will be difficult to sell your home as probable buyers might not bother to even begin negotiations. In these days when houses have lost value it is also important not to undersell yourself- realistic and competitive are the two watch words here. It is not hard to find out the prices of homes in your neighborhood. Call the REALTOR® who is selling another home, look in real estate magazines and sometimes neighbors can be your best source of information.
Find a REALTOR® to help you. Again, neighbors can be the best source of finding a reliable agent. Remember a person cannot call themselves a REALTOR® unless they belong to the National Association of REALTORS® (NAR). REALTORS®, as opposed to a licensed agent, in addition to adhering to local and state laws, also must adhere to a strict code of ethics set forth by the NAR. They tend also to have taken additional courses in real estate and have real expertise to assist you in selling your home.
By keeping these two aspects in mind, your home should be able to be sold.  The process of selling can be simplified by giving consideration to the price you are asking and engaging the right REALTOR®. In the real estate world, you need to put your best foot forward always to get the best results, so do not hesitate. Put these two tips to use today and watch your home sell before your eyes.

The spring season usually brings an increase in buying and selling to the real estate market, and housing experts are mostly optimistic that this spring will be even better than recent years.
Some signs are already there: Housing inventories are declining, housing affordability is at record highs, mortgage rates are at all-time lows, and the job market is improving.
Existing-home sales have been edging up in recent months, and for-sale housing inventories were at nearly 2.4 million units in December, reaching its lowest point since 2005, according to National Association of REALTORS® data.
NAR’s Chief Economist Lawrence Yun says home prices are beginning to stabilize in many markets.
Also, NAR’s Housing Affordability Index is at its highest level since the 1970s, which indicates that for the average family housing is very affordable.
The National Association of Home Builders is also predicting an improvement this spring among the new-home sector. NAHB is predicting that home sales will increase 18 percent this year, that’s after facing their lowest on record in 2011.
However, threats to a housing recovery still loom this spring. Strict mortgage lending is keeping some buyers on the sidelines, and foreclosures continue to put downward pressure on overall home prices in many markets.
“The signals are a little hard to extrapolate, but ultimately by the end of this year we should see the housing market on more solid footing,” says Celia Chen, senior housing economist with Moody’s Analytics. “So an improvement but off of very, very weak activity.”
Source: “Real Estate: A Buy or Bust This Spring Selling Season?” Investor’s Business Daily (Feb. 2, 2012)

After several positive housing reports released this month, the National Association of Realtor’s Pending Home Sales Index decreased 3.5% in December. Since it tends to be a slow month for housing due to several holidays, this report should not come as a shock. According to the Commerce Department, New Home Sales were also down 2% for the month of December. For another week, while mixed reports flourish, mortgage rates have remained low and stable according to Freerateupdate.com’s weekly survey of wholesale and direct lenders. Borrowers are still looking at all time low mortgage rates with 30 year fixed conforming mortgage rates at 3.500%, 15 year fixed mortgage rates at 2.875% and 5/1 adjustable mortgage rates at 2.250%. Good credit is essential in order to receive these lowest mortgage rates with 0.7 to 1% origination fee. Last week, the Federal Housing Finance Agency’s Home Price Index showed an increase of 1% from October to November on a seasonally adjusted basis. Any increase needs to be taken seriously by potential home buyers who want to get in at the lowest possible home price.

FHA may see an increase in mortgage loans now that the higher loan limit is in place for borrowers who would otherwise need to obtain a jumbo mortgage. Current FHA 30 year fixed mortgage rates are at 3.250%, FHA 15 year fixed mortgage rates are at 2.750% and FHA 5/1 adjustable mortgage rates are at 2.750%. FHA mortgage rates are not risk based and, therefore, are not affected by credit scores. Credit scores are used only to determine the required down payment which is either 3.5% with a score as low as 580 and 10% with scores between 500 and 580. FHA mortgages still allow down payment assistance from several sources such as approved gifts and housing grants and loans. Co-borrowers can also be used to strengthen the mortgage application. FHA offers several different types of loan programs and options which make up for the higher FHA closing costs (APR) which is caused by the upfront mortgage insurance premium and other FHA fees.

Once again, jumbo 30 year fixed mortgage rates dropped back down to 4.125%, a decrease of .125%. Jumbo 15 year fixed mortgage rates are at 3.375% and jumbo 5/1 adjustable mortgage rates are at 2.500%. It is necessary for borrowers to have excellent credit to secure these lowest jumbo mortgage rates with 0.7 to 1% origination fee. Stricter guidelines for jumbo mortgage approval are set by lenders, who do so in order to reduce their risk, since these are considered portfolio loans. Lenders look for long term, steady employment that must be fully documented and verified. Assets, although not necessarily cash, must be substantial to cover the larger down payment requirements and additional months of reserves that are necessary.

Since mortgage rates move in the opposite direction of MBS prices, it is not a surprise that mortgage rates have remained intact. MBS prices were mostly up this week as investors turned to the safety of U.S. debt. European financial talks, that are not producing any definite results, are keeping investors on the edge. The Fed’s announced last week that they plan to keep rates low through 2014 which is longer than anyone expected. Durable Goods rose higher than expected in December. Jobless claims increased according to the Labor Department, but was close to predictions. A weaker than expected GDP report disappointed investors, but Consumer Sentiment and Personal Income was higher than predictions. Core PCE price index rose 0.2% in December. The flow of mixed reports has investors cautious, but on the other hand, is keeping mortgage rates down.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard .07 to 1% point origination fee.

Published: February 1, 2012