Lending


Living near an occupied property in foreclosure can bring down home prices nearly twice as much than just living next door to a vacant home, according to a new study by the Federal Reserve Bank of Cleveland, which analyzed sales data of nearly 10,000 homes in the Cleveland area.

“The impacts of homes with multiple indicators of distress are larger than the impacts of homes that are only vacant, delinquent, or recently foreclosed,” the researchers found.

Some findings from the study:

  • Homes within 500 feet of at least one vacancy sold 0.8 percent lower.
  • Occupied home that had recently entered the foreclosure process lowered the sales price of nearby homes by 1.8 percent.
  • Sales within 500 feet of a home where a delinquent borrower abandoned the home saw, on average, a 3.1 percent drop to home values.
  • The largest drop was from homes that were tax delinquent, vacant, and foreclosed: Home sales prices within 500 feet were found to be 9.6 percent lower.

Source: “Study Finds Foreclosures Harm Home Prices More Than Vacancies,” HousingWire (Oct. 20, 2011)

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Daily Real Estate News | Friday, September 30, 2011

 

Starting Saturday, many borrowers in pricey housing markets may find they’ll need a higher down payment or pay higher rates. The size of mortgages that the government will back in several high-priced regions is set to drop on Oct. 1, which some analysts expect will serve as another thorn to the housing market.

In 2008, Fannie Mae and Freddie Mac raised its cap on conforming loans up to $729,750 in some of the most expensive housing markets so that larger mortgages would be available to home buyers. But those caps are set to reset on Oct. 1, scaling back to a maximum of $625,500 in some areas of the country.

Housing analysts say the drop will make it more expensive and harder for some buyers to qualify for home purchases in expensive markets, particularly along the coasts.

“The down-payment issue is the most significant aspect form borrowers standpoint,” says Greg McBride, a senior financial analyst at Bankrate.com. “These changes will price some prospective borrowers out of the market.”

Source: “Big Borrowers Face Larger Down-Payments, Rates,” MarketWatch (Sept. 30, 2011) and “Big Mortgages: Harder to Get and More Expensive With Loan Caps,” CNNMoney (Sept. 30, 2011)

Read More:
On Loan Limit Drop, Middle Faces Hard Hit

House Fails to Vote on Extending Loan Limits

S&P Lowers Fannie, Freddie Credit Rating-Daily Real Estate News | Tuesday, August 09, 2011

Standard & Poor’s downgraded the credit rating of lenders backed by the federal

government on the heels of the first-ever lowering of the U.S.’s credit rating.

Fannie Mae, Freddie Mac, and other government-backed lenders were lowered one step from AAA to AA+, S&P reported in a statement issued Monday. Some analysts say the downgrade may force home buyers to pay higher mortgage rates.

“The downgrades of Fannie Mae and Freddie Mac reflect their direct reliance on the U.S. government,” S&P said in a statement. “Fannie Mae and Freddie Mac were placed into conservatorship in September 2008 and their ability to fund operations relies heavily on the U.S. government.”

The GSEs own or guarantee more than half of U.S. mortgage debt.

Freddie Mac said that the lower debt rating will cause “major disruptions” in its home-lending by possibly reducing the supply of mortgages it can purchase. It said in a Securities and Exchange Commission filing that the lower rating could hamper home prices and even lead to more home-loan defaults on mortgages it guarantees.

Meanwhile, the Federal Housing Finance Agency on Monday assured investors that securities issued by GSEs are sound. “The government commitment to ensure Fannie Mae and Freddie Mac have sufficient capital to meet their obligations, as provided for in the Treasury’s senior preferred stock purchase agreement with each enterprise, remains unaffected by the Standard & Poor’s action,” said Edward DeMarco, FHFA acting director.

Some analysts and lenders have said they don’t see the fallout from the S&P downgrade on the U.S. and other banks as having such a widespread affect. “It’s likely that once the storm passes, you’ll get an increase in mortgage rates because of this, but it won’t be significant,” says Anika Khan, a housing economist at Wells Fargo.

S&P also announced on Monday that it had lowered its credit ratings for 10 of 12 federal home loan banks and federal farm credit banks from AAA to AA+.

Source: “S&P Lowers Fannie, Freddie Citing Reliance on Government,” Bloomberg (Aug. 8, 2011); “S&P Downgrades Fannie and Freddie, Farm Lenders and Bank Debt Backed by U.S. Government,” Associated Press (Aug. 8, 2011); Freddie Mac Reports $4.7B Loss, Says S&P Downgrade Will Disrupt Mortgage Market,” Associated Press (Aug. 8, 2011); and “FHFA Assures Investors After Fannie, Freddie Downgrade,” HousingWire (Aug. 8. 2011)

Read More:
Will the S&P Downgrade Affect Interest Rates?

Commodity prices

Good news bears

Aug 8th 2011, 13:39 by The Economist online

A fall in commodity prices offers some cheer among the market gloom

THE equity markets may be suffering again as investors worry about sovereign debts and a slowing global economy. But the sell-off has also extended into the commodity market, particularly in oil: West Texas intermediate is trading at around $84 a barrel. This is a bearish story that is good news for western consumers. High raw-materials prices acted as a tax rise in the first half of the year; now they are falling the effect will be akin to a tax cut. There is just one caveat. The working assumption is that the recent sharp fall in the oil prices is caused by concerns about a slowing US economy; if it is really due to a sharp slowdown in emerging markets as well, equity markets will really have cause to worry.

Readers’ comments

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Welcome back to Earth !

BRL, you better find a parachute for you…

Deflation, your time has finally come, after 2.5 years of delay

We called it:
http://seekingalpha.com/article/285619-the-debt-downgrade-and-the-summer…

We’re outperforming today as we did all of last week.

I remember in 2008 petroleum peaked in May for their highest price in history. The cause was never explained.

This price exceeded 2004 levels when the Gulf refineries were smashed by a series of Hurricanes notable Katrina and Rita. The prices exceeded the outbreaks of Gulf War 1 and 2 with Iraq and even the 9/11 attacks. The price of oil exceeded Supertankers being attacked by terrorist teams, Iran mining the critical choke point of the Strait of Hormuz where 40% of World travels, Putin’s energy cut offs, or raging piracy off the Somalian coasts.

I want to propose an actor and a plot. Follow the Money. Who has the Wealth and Power and the Means and Motive? The world’s largest exporter of oil is Saudi Arabia.

And in 2008 they saw an opportunity to influence the election of the most powerful office in the world. The Saudis grew tired of Bush and the Republicans. And the Republican Presidential Candidate McCain seem to want to open up a third war front on Iran. The other candidate was named Hussein and may prove to be a tribal brother.

And when your only tool is a hammer, every thing looks like a nail. By reducing oil imports by 5%, the Saudis can affect oil prices world wide instantly and to astonishing effect. The Saudis used their control over oil supply to jigger a shortage, which lead to price spikes 6 months before the election and precipitated the American Great Recession of 2008. John McCain argued their was no recession under Republican leadership and was soundly trounced in the election.

But this Recession snowballed into the Nov 2008 banking crisis, Lehman Bros downfall, the mortgage crisis, AIG insurance crisis, Automaker bankruptcy and the unemployment morass. All because of oil spikes.

An incumbent President’s greatest opponent is the state of the economy in an election year. And the Saudis are again using their hammer this time to LOWER the price of oil to brighten the American economy and re-elect President Obama. We are puppets on a string.

Unfortunately, the law of unintended consequence, the Recession they brought on in 2008 is still around and may be into a double dip. The Saudis are at it again doing their best to suppress the price of oil to promote a recovery.

Surprise, Money is Power! And Economic issues can influence Politics. Strange things happen in election years. Yes, even foreign actors can also pull some stringshmTzic3YT/

Your assertion that the Saudis influenced oil price to rout the Republicans in American presidential election is clever, but simply UNTRUE. The Saudis, or more accurately King Abdullah and the House of Saud, most likely WANTED warmongering hawks in the White House again, so that the US could wipe Iran and its nuclear programmes off the map. Wikileaks showed that King Abdullah, while posturing as an Islamic patriot who wanted the US to moderate its Mideast policies, privately encouraged GWB to attack Iran. This explains the confusion and the disorderliness with which the Saudi diplomatic corps to Washington D.C. have been conducting themselves vis-a-vis the Iranian issue.

And in this day and age, it is unwise to assume that the power to set the price of oil is centralized in Riyadh, Caracas or whatever. Thousands of traders tinker with the price of crude, and other governments can simply flood the market with their strategic oil reserves to drive the price down.

On this blog we publish a new chart or map every working day, highlight our interactive-data features and provide links to interesting sources of data around the we

 

This is a brief window of opportunity….and every opportunity has a “shelf life”!

 

Rates are amazing right!!!  

We are locking rates in between 4.375 and 4.5%…..on NO COST refinances and purchases…..up to loan amounts of $729,000! The jumbo conforming refi applications must be received no later than August 15th….as jumbo conforming loan limits are being reduced to $625,000 come October 1st. All loan amounts between $625,000 and $729,000 must fund by September 30th to take advantage of the conforming rates and guidelines; after which time loans that fall into that category will be considered jumbo financing. FYI, the jumbo conforming 30 year fixed rates are about 1% lower than 30 year jumbo rates. That’s a BIG difference in a monthly mortgage payment of that size loan amount.

 

 

 

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Loan-Limit Deadline Looms

Practitioners are speaking out against proposals in Congress that could potentially devastate sales.

 

July 2011 | By Robert Freedman

 

 

 

 

Vacaville, Calif., is a middle-class outpost on the outskirts of pricey San Francisco and nearby East Bay communities like Walnut Creek. In some parts of the city, homes sell for about $300,000, says local practitioner Jeannette Way, CRS, of Gateway Realty. The vast majority of buyers—up to 90 percent, Way estimates—rely on financing backed by the Federal Housing Administration because the conventional lending market simply isn’t there.But now even FHA lending is at risk because of a proposal floating in the U.S. House of Representatives to change the formula with which loan limits are calculated. It would reset the maximum loan values and could remove the “floor” that keeps FHA limits from dropping to unrealistically low levels—in the case of Vacaville, limits could fall to about $170,000.

“You might as well just wipe the industry away,” says Way, CRS, who also serves as 2011 chair of the NATIONAL ASSOCIATION OF REALTORS®’ Federal Housing Policy Committee. “It just won’t be there anymore.”

Lawmakers are deep into talks about changing limits not just for FHA loans but also for Fannie Mae and Freddie Mac’s conventional conforming loans. Talks are happening now because the current limits expire on Sept. 30, the end of the federal fiscal year.

NAR estimates that reverting to the lower FHA limits on Oct. 1 will impact 612 counties in 40 states and the District of Columbia, with an average loan limit reduction of more than $50,000.

Concern in Moderate Markets, Too

In Plymouth, Mich., not far from Detroit, the area would take a hit similar to what’s expected in Vacaville. “The housing market here would come to a standstill and I’d have to find a new job,” says Claire Williams, ABR, GRI, a practitioner with Remerica Hometown One and 2011 vice chair of the Federal Housing Policy Committee.

In parts of Wayne County, homes cost around $200,000, Williams says. But if the proposal circulating in the House becomes law, the maximum FHA loan amount throughout the county, which includes Detroit, would drop to less than $66,000.

NAR President Ron Phipps has made clear that Realtors® would fight such a drastic drop. “Our housing recovery remains fragile at best,” he said in testimony before the House Financial Services housing subcommittee in May. “Changing the loan limits at this critical time will only restrain liquidity and hamper the recovery.”

Since 2008, the floor has been $271,050 for FHA loans and $417,000 for the government-sponsored enterprises Fannie and Freddie. For expensive areas like San Francisco, loans can go up to $729,750 under the FHA and the GSEs.

It’s the FHA floor of $271,050 that would go away under the House proposal. Loans would be limited to 125 percent of the area median home price, so if the median home price is $175,000, the highest loan the FHA would guarantee would be $218,750. But it gets more complicated than that, because the floor would be calculated based on county rather than metropolitan statistical area.

“Counties across the country would see their loan limits reduced by tens of thousands of dollars,” says Barry Rutenberg, a home builder from Gainesville, Fla., who testified at the same House housing subcommittee hearing as President Phipps.

A Push to Keep Limits As Is

NAR has been fighting for months to retain the existing $417,000 loan limit for Fannie and Freddie loans and the $271,050 limit for FHA loans, along with the higher limits for expensive areas. These limits were enacted two years ago, and were critical in helping to stem the home sales crisis, lawmakers have said. NAR and other groups have rallied around bipartisan legislation written by Reps. Brad Sherman (R-Calif.) and Gary Miller (D-Calif.) to make these limits permanent.

Despite bipartisan support for maintaining stable loan limits, keeping limits where they are will be an uphill battle because of the country’s pressing budget concerns, NAR analysts say. To allay those concerns, industry analysts and academics have made clear that higher limits by themselves don’t cost the government more money than lower limits. In fact, higher loan sizes have actually helped the FHA insurance fund because on a historical basis they’ve performed better than lower-balance loans, according to an internal 2009 FHA audit.

The Cost of Non-Action

If lawmakers fail to act on the Sherman-Miller legislation, and if they don’t pass the House proposal to lower the limits and remove the FHA floor, loan limits for both the FHA and the GSEs would revert to levels that were set in emergency legislation enacted during the financial crisis.

Under those levels, FHA and GSE limits would drop from 125 percent to 115 percent of the area median home price, although limits couldn’t go below the current floors: $417,000 for Fannie- or Freddie-backed loans and $271,050 for the FHA-backed loans. Limits in expensive areas would drop to $625,500 for the FHA and Fannie and Freddie alike.

That’s clearly far better than the House proposal, but NAR will continue to urge lawmakers to support the Sherman-Miller bill. “If Congress does nothing and loan limits revert to the levels in the emergency bill, that’s a far better outcome than other scenarios, including if the FHA floor is removed,” says Way, “especially given the pressure Congress is under to address the federal deficit. But it will still hurt. At least 40 states will see their limits drop, and thousands of households won’t be able to buy. We have to keep fighting to keep loan limits where they are.”

Mortgage Rates Hit Record Lows Amid Signs of Weakening Economy

MCLEAN, Va., Aug. 4, 2011 /PRNewswire/ — Freddie Mac (OTC: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing mortgage rates dropping sharply amid falling bond yields and signs of a weaker than expected economy. The 30-year fixed averaged 4.39 percent, its lowest level for 2011. The 15-year fixed and 5-year ARM set new historical record lows averaging 3.54 percent and 3.18 percent, respectively.

News Facts

  • 30-year fixed-rate mortgage (FRM) averaged 4.39 percent with an average 0.8 point for the week ending August 4, 2011, down from last week when it averaged 4.55 percent. Last year at this time, the 30-year FRM averaged 4.49 percent.
  • 15-year FRM this week averaged 3.54 percent with an average 0.7 point, down from last week when it also averaged 3.66 percent. A year ago at this time, the 15-year FRM averaged 3.95 percent.
  • 1-year Treasury-indexed ARM averaged 3.02 percent this week with an average 0.5 point, up from last week when it averaged 2.95 percent. At this time last year, the 1-year ARM averaged 3.55 percent.

Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage. Visit the following links for Regional and National Mortgage Rate Details and Definitions.

Quotes

Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac.

  • “Treasury bond yields fell markedly after signs the economy was weaker than what markets had previously thought allowing fixed mortgage rates to follow this week with the 15-year fixed and 5-year ARM setting new historical lows. The economy grew 1.3 percent in the second quarter, which was below the market consensus forecast, and first quarter growth was cut to less than a quarter of what was originally reported. In fact, the first half of this year was the worst six-month period since the economic recovery began in June 2009. Moreover, consumer spending fell 0.2 percent in June, representing the first decline since September 2009.
  • “On a positive note, there were indications that the housing market is firming. Real residential fixed investments added growth to the economy in the second quarter after subtracting from growth over the first three months of the year. The CoreLogic® National House Price Index rose for the third straight month in June (not seasonally adjusted) and was the first three-month gain since June 2010. Finally, pending existing home sales rose for a second consecutive month in June and was up nearly 20 percent from June 2010 when the housing tax credits expired.”

Get the latest information from Freddie Mac’s Office of the Chief Economist on Twitter: @FreddieMac

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters.

SOURCE Freddie Mac

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