February 2010

February  2010  |   Share

Home Price Reductions Level Off

The share of homes on the market with price reductions declined to an average of 21 percent as of Feb. 1, according to Trulia.com, which has been tracking the information since April 2009.

This is a significant decrease compared to November 2009, when 26 percent of homes had at least one price reduction

The total dollar amount cut from home prices dropped to $22.6 billion as of Feb. 1, down from $28.1 billion in November, a 19 percent decrease.

The average discount for price-reduced homes is holding steady at 11 percent off the original listing price.

Here are the cities with the largest decrease in listings with price reductions between last November and this month, according to Trulia.

  • San Francisco, -46
  • Oakland, Calif., -43
  • Sacramento, -42
  • San Jose, -40
  • Indianapolis, -39
  • Seattle, -37
  • San Diego, -33
  • New York, -33

Source: Trulia.com 2/2010

REALTOR® Insider: D.C. News and Events

FDIC Issues Statement Taking Strong Exception to False Claims in Web Video

Conventional Residential Lending Report

NAR Submits Comments on HUD’s Proposed Rule to Implement the SAFE Act
REALTOR® Insider: D.C. News and Events

FDIC Issues Statement Taking Strong Exception to False Claims in Web Video
Following the distribution of a video that reiterated the false claims that the FDIC “loss sharing agreement” with OneWest, the successor to IndyMac Bank, disadvantaged short sales, the FDIC promptly issued a statement taking strong exception to the charges in the video.Additionally, NAR CEO Dale Stinton received a phone call from FDIC Chairman Sheila Bair to discuss this issue. We believe the strong FDIC statement should put to rest the charges levied in the video.To read the FDIC statement regarding the sale of IndyMac Bank F.S.B to OneWest Bank and supplemental information use the links listed below.

FDIC Provides Additional Information on its Loss Share Agreement With OneWest Bank >
Supplemental Facts about the Sale of Indymac F.S.B. to OneWest Bank >

Contacts: Joe Ventrone, 202-383-1095

Contacts: Jeff Lischer, 202-383-1117

Conventional Residential Lending Report

NAR Submits Comments on HUD’s Proposed Rule to Implement the SAFE Act
On February 12, 2010, NAR President Vicki Cox Golder submitted a letter to Shaun Donovan, Secretary of Housing and Urban Development, on HUD’s proposed rule to implement the Secure and Fair Enforcement Mortgage Licensing Act of 2008 (the SAFE Act). The SAFE Act requires states to establish loan originator licensing requirements that meet minimum standards. The rule establishes minimum requirements for state licensing, the procedures HUD will use to determine whether a state is in compliance, the actions HUD will take if a state is not in compliance, and HUD’s enforcement authority if it operates the system for non-compliant states.NAR urges HUD to exempt all seller financing from the licensing requirements. If HUD refuses to accept this comment, NAR urges it to make the proposed exemption for seller financing of a residence by the owner much more flexible by expanding it to apply to other sellers who occasionally provide financing for property they own. The exemption for the sale of a residence should also be expanded to include sale of an inherited residence by heirs and the sale of a former residence. NAR also asks HUD to clarify that the payment by a lender of a real estate commission for the sale of a lender-owned property does not make the real estate broker or agent a loan originator subject to SAFE Act licensing.NAR’s Comment Letter >
HUD’s Proposed Rule >

Contacts: Jeff Lischer, 202-383-1117

Contacts: Tony Hutchinson, 202-383-1120

Shadow Inventory Unlikely to Hurt Market

Nearly 5 million houses and condos, of which the mortgages are delinquent, will go through foreclosure over the next few years, a new study by John Burns Real Estate Consulting Inc. concludes.

This represents more than half of the 7.7 million households now behind on their mortgage payments. The situation is worst in Arizona, California, Florida, and Nevada. Burns calculates that there is an inventory equivalent to 27 months of sales in Orlando, 24 months in Miami, and 18 months in Las Vegas.

Consulting firm CEO John Burns says there is strong investor demand for these properties, so as long as employment continues to recover and interest rates remain moderate, these sales won’t have much impact on overall prices.

Source: The Wall Street Journal,


Housing’s Crystal Ball

The New York Times

HOME buyers heading into real estate’s busy spring season face a tricky question: should they buy soon, before mortgage rates increase, or wait a few months, when housing prices are finally expected to hit rock bottom?

Of course, the assumptions at the core of that question could easily fall through. But rarely in recent years have economists from the mortgage and housing industries been so closely aligned in their short-term nationwide forecasts as they seem to be now.

Economists are generally predicting that mortgage rates will begin to edge up in late March, settling at about 5.5 percent, possibly as high as 6 percent, for a 30-year fixed-rate loan. The rate today is around 5 percent. They also expect that the inventory of foreclosed homes will grow through the summer, saturating the market with cheap properties and keeping overall prices low.

“I wouldn’t rush,” said Mark Zandi, the chief economist at Moody’s Economy.com, “but if I found a house I was excited about, I wouldn’t wait. You might not be buying at the very bottom, but you’ll still get a great rate, and if you stay for more than a few years, you’ll be rewarded.”

By that time, he added, home values will have appreciated.

Two factors could push rates higher, economists say. First, the Federal Reserve is set to stop subsidizing the mortgage market sometime next month, when it exhausts the roughly $1.25 trillion earmarked for mortgage-backed securities sold by Fannie Mae and Freddie Mac. The government stepped in as a buyer during the mortgage market crisis, when most investors had rejected these securities. Economists expect investors to re-enter the market, but only if rates on the securities become more attractive.

Mortgage rates also typically move in lockstep with the long-term economic outlook. Economists generally believe that the nation is in the early stages of a slow recovery, and that as the recovery proceeds, interest rates will go up.

Mr. Zandi and Jay Brinkmann, the chief economist for the Mortgage Bankers Association in Washington, are both predicting that rates will not exceed 5.5 percent this year. If they rose beyond that level, Mr. Brinkann said, the federal government would very likely resume its subsidies rather than risk damaging the real estate market.

But Cameron Findlay, the chief economist for LendingTree.com, predicted that rates could go as high as 6 percent without any government intervention.

Mr. Findlay also studied the mortgage burden of households across the nation, as a guide to how quickly particular states could recover from the recession.

In New York state, for instance, the average mortgage payment is $1,326, or about 34 percent of the average household’s income ($47,349), Mr. Findlay said. The state’s unemployment rate is 9 percent, which is slightly lower than the national average of 9.7 percent. Mr. Findlay’s data did not separate New York City from the rest of the state.

Connecticut’s ratio of mortgage debt to income is lower, at 24 percent, and the unemployment rate is also lower, at 8.9 percent, which he says means people are generally better positioned to buy homes than in New York.

New Jersey’s mortgage debt-to-income ratio is also lower than New York’s, Mr. Findlay said, at 26 percent. But the state’s unemployment rate is 10.1 percent, he added, and that means its housing recovery will probably trail New York’s.

Mr. Zandi of Economy.com said he expected the nation’s housing prices to fall another 8 percent during 2010 and bottom out by the end of the year, 34 percent lower than they were at the market’s peak in the spring of 2006.

Housing prices will increase once foreclosures start to fall. “It will be a number of years before prices really start to rise in a normal way,” Mr. Zandi said.

A version of this article appeared in print on February 21, 2010, on page RE6 of the New York edition.

Due to current economic conditions, the number of short sale properties on the market is rising. The increasing number of short sales on the market presents challenges for REALTORS®. Below you’ll find more information on: short sales and their challenges, the government’s efforts to address these challenges, and tools to help you navigate the short sale process. 

Home Affordable Foreclosure Alternatives Program (HAFA)

On November 30, 2009, the Treasury Department released guidelines and forms for its new Home Affordable Foreclosure Alternatives Program (HAFA), part of the  Home Affordable Modification Program (HAMP).

New: About HAFA Color Brochure> (PDF: 873K) and Text-Only About HAFA Brochure> (PDF: 358K)
Government Forms and Guidelines > (PDF: 624K)
NAR HAFA Program FAQ>  (PDF: 404K)

Latest news:
Realtors® Strive to Reduce Stress in Short Sale Transaction. (Feb. 19)
FDIC Refutes False Video Claims (Feb. 16)
New Video: Will New Federal Guidelines Speed Deals? (Jan. 20)

 Short Sales Commissions Policies

Freddie Mac Short Sales Commission Policy (PDF 128K)  (Oct. 27)
Fannie Mae Short Sales Commissions Policy and Appeals Process (PDF 299K) (Oct. 27)

Bookmark and Share
What is a short sale?

A short sale is a transaction in which the lender, or lenders, agree to accept less than the mortgage amount owed by the current homeowner. In some cases, the difference is forgiven by the lender, and in others the homeowner must make arrangements with the lender to settle the remainder of the debt.

Why is the number of short sales rising?

Due to the recent economic crisis, including rising unemployment, and drops in home prices in communities across the nation, the number of short sales is increasing. Since a short sale generally costs the lender less than a foreclosure, it can be a viable way for a lender to minimize its losses.

A short sale can also be the best option for a homeowners who are “upside down” on mortgages because a short sale may not hurt their credit history as much as a foreclosure. As a result, homeowners may qualify for another mortgage sooner once they get back on their feet financially.

What challenges have short sales presented for REALTORS®?

The rapid increase in the number of short sales, and the short sales process itself present a number of challenges for REALTORS®. Major challenges include:

  1. Limited experience
    Many REALTORS® are new to the short sales process; a difficulty which is compounded by many lenders’ lack of sufficient and experienced staff to process short sales. Even if the REALTORS® are experienced, most servicers are under-staffed and still not adequately trained, making negotiating a short sale particularly difficult.
  2. Absence of a uniform process and application
    Currently, both short-sales documents and processes are lender-specific, making it very difficult and time-consuming for REALTORS® to become knowledgeable and efficient in facilitating these transactions. 
  3. Multiple lenders
    When more than one lender is involved, the negotiations are much more difficult. Second lien holders often hold up the transaction to exert the largest possible payment, in exchange for releasing their lien, even though in foreclosure they will get nothing.

As a result of these challenges our members have reported difficulties with: unresponsive lenders; lost documents that require multiple submissions, inaccurate or unrealistic home value assessments, and long processing delays, which cause buyers to walk away.

What is being done to address or eliminate these challenges?

On May 14, 2009, the Obama Administration announced its upcoming Foreclosure Alternatives Program. Among other things, the new program:

  • Establishes financial incentives for servicers, sellers, and second lien holders to encourage the completion of short-sale transactions.
  • Requires that a timeline, of no fewer than 90 days, be set to allow a homeowner to sell a home, without threat of foreclosure action.
  • Requires the short sale agreement to specify reasonable and customary real estate commissions and costs to be deducted from the sales prices. (The servicer must agree not to negotiate a lower commission after receiving an offer.)
  • Will provide standardized documents, including short-sale agreements and offer acceptance letters.

More Information on Short Sales 

Foreclosure Alternative Program Fact Sheet (PDF 44K)

Protecting the Mortgage Interest Deduction
On February 1, President Obama released his budget proposal for 2011. Consistent with its proposed FY 2010 budget, the Administration’s again has recommended limiting the value of the mortgage interest deduction (MID) for upper income taxpayers by, in effect, converting the deduction to a 28% tax credit for those individuals currently in the 33% or 35% tax brackets.

The mortgage interest deduction has been part of U.S. tax policy since the federal tax code was first enacted in 1913. It is a remarkably effective tool that facilitates homeownership. While only about 30% of all taxpayers in any given year itemize their deductions, more than 3/4 of homeowners utilize the deduction over the period they own their home. For this reason, NAR is 100% opposed to the provision that modifies the MID and prepared to use its formidable array of resources against its enactment.

Under current law, interest paid on up to $1 million of mortgage debt, plus interest paid on home equity loans or lines of credit of up to $100,000 may be deducted. These caps apply to the combined indebtedness on a principal residence and one additional residence. As currently drafted, the Administration’s proposal would change the MID by reducing the economic benefits of mortgage deductibility for families earning over $250,000 (AGI) and on single taxpayers earning over $200,000 (AGI).

In the past, most Members of Congress have supported our views and also opposed changes to the MID. Senator Max Baucus, Chairman of the Senate Committee on Finance, and Representative Charles Rangel, Chairman of the House Ways and Means Committee, along with their other colleagues, pointed out in 2009 that changes to itemized deductions were ill advised stating “some of the reforms and offsets contained or referenced in the budget, such as the limitation on itemized deductions, raise concerns and will require more study as we determine the best policies for getting America back on track.”

Today’s housing market, while improving, cannot absorb any negative signals, no matter what the income level of the taxpayer and no matter what market segment of housing might be affected. As we did in 2009, NAR will launch a multi-phase plan of action to eliminate this provision from the budget plan. NAR has already sent letters to Members of the House of Representatives and the Senate and will continue to protect the MID.

Eye on the Hill – February 2010 Edition (Word: 64K) >
Eye on the Hill – February 2010 Edition (PDF: 200K) >

Friday, February 19, 2010, 9:08am PST

Report: Seeno Construction raided by FBI

San Francisco Business Time

Related News

Federal agents raided the Concord headquarters of Seeno Construction Co. and a related company Thursday, according to a report in the Feb. 19 Contra Costa Times newspaper.

Seeno, “a family development empire,” according to the Times, built much of the suburbs in the East Bay over the last seven decades.

The Times said agents from the Federal Bureau of Investigation, Internal Revenue Service and U.S. Secret Service raided two office buildings in Concord, confiscating records from the Albert D. Seeno Construction Co. and Discovery Builders.

Both companies are located in the 400 block of Port Chicago Highway, the Times reported. An FBI spokesman “declined to discuss the nature of the probe or what type of records the agents sought,” The Times said, but the FBI’s Joseph Schadler indicated an investigation has been under way for some time. No arrests were made.



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