Pending Home Sales on a Roll, Up for Sixth Straight Month

Contract activity for pending home sales has risen for six straight months, a pattern not seen in the history of the index since it began in 2001, according to the National Association of Realtors®.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in July, increased 3.2% to 97.6 from a reading of 94.6 in June, and is 12.0% higher than July 2008 when it was 87.1.The index is at the highest level since June 2007 when it was 100.7.

Lawrence Yun, NAR chief economist, said the housing market momentum has clearly turned for the better. “The recovery is broad-based across many parts of the country. Housing affordability has been at record highs this year with the added stimulus of a first-time buyer tax credit,” he said. “Other buyers are taking advantage of low home values before prices turn higher. Nationally, the typical mortgage payment now takes less than 25% of a middle-income family’s monthly income to buy a median priced home, with payment percentages so far in 2009 being the lowest on record dating back to 1970. As long as home buyers stay within their budget, mortgage payments will be very manageable,” Yun said.

NAR estimates that about 1.8 to 2.0 million first-time buyers will take advantage of the $8,000 tax credit this year, with approximately 350,000 additional sales that would not have taken place without the credit. Buyers have little time to act because they must complete the transaction by November 30, 2009 to qualify for the credit. Unless extended, contracts signed but not completed by that date will not be eligible- it is taking approximately two months to complete home sales in the current market.

The Pending Home Sales Index in the Northeast declined 3.0% to 78.8 in July but is 4.7% higher than July 2008. In the Midwest the index slipped 2.0% to 88.1 but is 8.1% above a year ago. In the South, pending home sales activity rose 3.1% to an index of 103.8 in July and is 12.0% above July 2008. In the West the index jumped 12.1% to 112.5 and is 20.0% above a year ago.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said Congress needs to keep the momentum going. “Even with a good recovery taking place, the market is not yet back to normal. With a gradual absorption of inventory, we are on the cusp of a general stabilization in home prices,” he said. “To ensure that housing has a broad stimulus to the overall economy and stays on sound footing, we’re encouraging Congress to extend the tax credit into 2010, and to expand it to all buyers of primary residences. The faster we stabilize home prices, the fewer families will face foreclosure and the quicker credit can be extended to other sectors of the economy,” McMillan said.

NAR’s Housing Affordability Index (HAI) stood at 158.5 in July, below the peak set in April but is still 36.0 percentage points higher than a year ago. The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income.
Yun expects existing-home sales to rise through the fourth quarter. “Unless the tax credit is extended, no one should be surprised to see home sales drop in the first quarter of next year,” he said. “However, the fundamentals of the housing market and the economy are trending up, and we expect home sales to generally pick up in the second quarter of 2010. The buyer psychology may be shifting from, ‘Why buy now when I can purchase later,’ to ‘I don’t want to miss out on a recovery.’”


The Meredith Mortgage Team

FotoFlexer_Photo Give First-Timers the Direction They Need By G.M. Filisko | October 2009

Nervous. Arrogant. Cautious. Excited. Although these words seem contradictory, they sum up today’s first-time buyers. “First-time buyers are many things at once,” explains Paul Gorney, a sales associate at Sudler Sotheby’s International Real Estate in Chicago. “They’re scared to pay too much, excited to get a ‘good deal,’ and confused because of the number of homes and the situations in which sellers are selling, such as short sales and foreclosures. “First-timers need serious guidance,” he says. That guidance is especially critical for buyers who are trying to beat the Nov. 30 closing deadline to qualify for the federal first-time home buyer tax credit. (At press time, it was unclear whether the credit would be extended.) Here’s how to overcome three false assumptions that can derail first-timers. 1. “The housing market is weak.” First-timers have likely read every stitch of news about how homes aren’t selling. The trouble is that’s simply not true in many entry-level markets. “First-time buyers need to understand the environment they’re competing in,” says Dana Graham, CRS®, a sales associate at Prudential California Realty in Palos Verdes, Calif. “In my market, homes for first-time buyers priced under $800,000 are hotter than a $2 pistol. A few months ago, one had 21 offers.” Graham turns that fact into a positive. “If there are so many other buyers,” he tells first-timers, “you’re not dumb to be buying now.” 2. “I need to see all the options.” Many buyers proceed with excessive caution because of the endless inventory and their desire to find the perfect home. That can lead to paralysis by analysis, says Kathleen Alexander, ABR®, CRS®, a sales associate with Keller Williams Realty Boston Metro. Like Graham, Alexander uses facts to get buyers off the fence. “I make sure they’re armed with all the data they could possibly desire—which homes have sold in which areas and for how much—and I explain how to interpret the data,” she says. “I want them to have a firm grasp on the market. That takes away a lot of the hesitancy.” Graham stresses today’s low interest rates. “I tell them that rates now are late-1950s type rates,” he says. “They have nowhere to go but up. If they go to an entirely plausible 7.5 percent—which is still low—prices would have to go down by about another 20 percent to make up for the difference in their monthly payments.” Don’t forget to remind them about the first-time home buyer tax credit deadline. “I tell buyers the tax credit is truly $8,000 they’ll get back when they file their taxes,” says Sam DeBord, associate broker at RE/MAX Connected in Seattle. “If they normally get a tax refund, they’ll get an additional $8,000. It’s a gift from the government to get them started as home owners.” (Note: There are income limits; buyers should consult a tax professional.) 3. “I’ve found a bargain!” It’s true that affordability is at record levels today, but many buyers need help putting price into perspective. “They think they can get a really, really nice house for $50,000, but the average home in our market is $150,000,” says Craig Frooninckx, e-PRO®, GRI, a sales associate with DPR Realty LLC in Phoenix. “They perceive that there are really great deals, which is true. But a lot of homes in our area are stripped of all their fixtures. While a home may be listed for $60,000, buyers are going to need $40,000 in cash to replace the plumbing and restore the kitchen and bathrooms.” That can be hard for buyers to accept; Frooninckx often has to ferry them around so that they can witness the homes’ condition themselves. “We have to look at the really low-priced homes for them to realize they don’t want to do all that work,” he says. “Then I say, ‘Give me a shot at showing you a couple of houses I think you’ll like.’” Before you take on any first-time buyers as clients, do some due diligence. “I make them come in for a chat to make sure they’re serious and can qualify financially,” Graham says. “It’s a litmus test. If they’re not willing to spend an hour or two to talk about their needs and financial situation, they’re not serious.”


Jumbo Freeze Might be Thawing
October 15, 2009 by Robert Freedman · 4 Comments
Filed under: Economics, Mortgage Financing
By Robert Freedman, senior editor, REALTOR® Magazine
It’s still early but there are signs the availability of jumbo financing might be improving—although underwriting standards probably won’t ease any time soon. That means the days of creditworthy borrowers having a tough time getting financing for an amount over the conforming loan limit might be ending but they’ll still have to come up with a significant down payment and be prepared to show lots of documentation, like three years worth of tax returns instead of the customary two.

NAR Chief Economist Lawrence Yun says lenders are slowly getting back into the game because the climate of dread is lifting: Wall Street analysts and business executives have recalibrated their performance scenarios to reflect the greatly improved conditions among lower-priced homes (thanks to the home buyer tax credit and steeply discounted pricing). That in turn is creating a virtuous cycle as the improved scenarios help relax concerns over the economy, pushing up equities, which in turn creates the wealth that further increases confidence.

In other words, the improving lower-end housing market and the rising stock market are helping to push big financial services companies back into the business of loaning money rather than hoarding cash. As a result, it’s not just safe agency loans that lenders are willing to make (Fannie, Freddie and FHA) but also non-conforming jumbo loans. That helps further the narrowing of the interest rate spread between comforming and non-conforming loans.

I spoke with Las Vegas luxury home sales specialist Kenneth Lowman yesterday and he says the jumbo market has a long way to go before it’s back to where it needs to be, but, importantly, big loans are being made again. Earlier this year, that wasn’t so clear-cut.

“We recenty did a jumbo loan in record time,” he says. It was for a home listed at a couple of million dollars—obviously not an everyday deal for most salespeople—but it closed in just 22 days. Six months ago, he says, that never would have happened.

Yun predicts that financing for jumbo loans, second homes, and commercial real estate will show marked improvement by the middle of 2010. By late 2011 or early 2012, we might even see more non-agency, private-label loans securitized by Wall Street.

Yet the mortgage market by then will surely be different than it was during the housing boom, and in a good way. Buyers will be far more careful about staying within budget and lenders will be far more cautious about making loans to buyers who aren’t staying within budget.

Yet there remains a big concern: inflation. Although prices remain stable because of continuing slack in the economy (high unemployment, excess business capacity), once the enconomy starts growing again federal budget deficits will create inflationary pressure. The main way to head that off, says Yun, is for the government to produce a credible plan for getting the deficit under control.

Hear some more from Yun in an audio podcast he recorded earlier this week, mainly to talk about the need for Congress to extend the tax credit, and in his latest video interview, below, in which he talks about home-sale trends.

Buyers who are considering the purchase of a condominium should inspect the health of the home owner’s association before they close.

The seller should provide the buyer all financial documents relating to the association in time for an attorney for the buyer to review them before closing.

Here’s some advice from Leonard Baron, professor of finance at San Diego State University, about the information that the seller should consider:

  • Does the association budget include money for operating expenses such as water, lights, elevator maintenance, and landscaping?
  • Is there extra money set aside in a reserve fund for long-term maintenance? If there is an outside reserve study, that should be provided. If not, there should be adequate money in the reserves right now to cover 50 percent of the estimated cost of repairs over the next 30 years.
  • Do the condo’s expenses exceed revenues due to a high foreclosure rate or other reasons that owners’ debts go unpaid?
  • If there is a shortfall, does the association have a plan besides cutting back on services for making it up?

All the leading indicators say housing is definitely on the mend, economists reported in advance of the official release of several pieces of good news expected this week.

Bloomberg News surveyed 53 economists and asked them where they expected the numbers to fall. Here are their predictions:

  • Construction starts in September are expected to hit a 610,000 annual rate, the most since last November.
  • Sales of existing homes likely rose to a two-year high.
  • Because of fear of a relapse, the Federal Reserve is predicted to leave interest rates low for a few more months.
  • Building permits, a sign of future growth, probably rose to a 590,000 annual pace, also the highest level since November, the Commerce Department is likely to announce.

Here’s what we’ve been sharing with our/your clients! For those of you we are not yet working with, this is relevant information for you to communicate effectively to your clients… 



Since the Fed began purchasing mortgage bonds and intervening in the mortgage markets, interest rates on fixed rate mortgages have dropped a full percentage point below where they would be otherwise. Take out the Fed’s subsidy, and mortgage rates are likely to drift back up by at least one percent. 


To put it in perspective: A one percentage point increase in mortgage rates – from 5.25% to 6.25% – would cost an extra $127 per month and $45,730 in interest over the life of a $200,000 fixed rate 30 year mortgage. This is exactly what could happen in 2010 once the Fed stops buying mortgage bonds.


The way mortgage companies set their interest rates is by figuring out the price that Fannie Mae and Freddie Mac are willing to pay them for the mortgage. Fannie and Freddie set their price by figuring out what investors on the bond market are willing to pay them for the Mortgage-Backed Securities (mortgage bonds) that they issue. When the Fed stops buying mortgage-backed securities, the demand for these bonds will be much less, and mortgage rates will go higher.


Fed officials have been signaling for some time that their unprecedented interventions in the mortgage markets may come to an end or even be reversed once the economy begins to improve.  While we don’t believe the Fed will start selling mortgage bonds right away, we do believe that rates will start drifting higher in 2010 once the Fed stops purchasing mortgage bonds.  After all, it’s not every day that the Fed spends a whopping $1.25 trillion to subsidize mortgage rates.


Take out this enormous subsidy, and the average person with a $200,000 mortgage who refinances or buys a house stands to lose $45,000 over the life of their home loan.


Let us help you, help your clients get off the fence!  The window of opportunity to buy and refinance is here!  It’s NOW!  While home prices and rates are “artificially low”.  Lower interest rates = more home affordability.

The Meredith Mortgage Team closes loans clean and on time!  We dazzle our clients with the best service in the mortgage business….hands down!

Prediction: Homes Sales to Rise 11 Percent Sales of existing homes will rise 11 percent in 2010, and sales of new homes will climb 21 percent over this year, Mortgage Bankers Association Chief Economist Jay Brinkmann predicted in a speech Tuesday at the organization’s annual meeting. “We still see a concentration in the lower end of the market,” Brinkmann said. “The entry level homes are in demand.” Brinkmann also predicted further declines in existing home prices, with the median falling to $164,200 in the first quarter of 2010. David Stevens, commissioner of the Federal Housing Administration, concurred, adding that mortgage rates will rise to 5.6 percent by the end of 2010, though not enough of an increase to discourage a 12 percent increase in mortgage applications next year.

How Consumers Can Win the Credit Game

Greg Vogel | October 6, 2009

It’s late 2009 and the consumer credit world is still in turmoil!  You have MANY new changes:

 1)   You have a new credit law, The Credit Card Accountability Responsibility and Disclosure Act of 2009, which partially became law in August 2009 and will completely become law in either February of 2010 or December 1, 2009 if Democrats have their way.

2)   You have a new FICO® score, FICO 08, which is now live and commercially available at all three of the credit reporting agencies. This new FICO score promises to do a better job of predicting future credit risk.

3)   You have millions of credit card holders who have seen their credit limits reduced, accounts closed, interest rates increased and/or their minimum payment requirements increased.

4)   In addition you have billions in lost home equity, which means no more safety net for those consumers who have excessive credit card debt.

5)   You have debt settlement companies aggressively marketing their services like vultures circling a dying carcass without fully disclosing the downside of possible lawsuits and severe credit damage to their customers who use their services.

6)   And finally, you have media and the undereducated that are spreading fallacies about the credit world, and are causing panic.


All in all, it’s a tough environment to survive and thrive in. Here are what I believe are the most important things that we consumers should be focused on over the next 24 months:


  • Continue to Improve Your Credit Scores
    • Continue to make your payments on time regardless of what you read or hear – Debt settlement companies would have you believe that the best way to serve you is to suggest that you stop making your payment to your credit card issuers. The theory is that a lender who isn’t getting paid might be more flexible for a consumer who isn’t making their payments. I guess it’s the “I’m lucky to get something” hypothesis. The problem is that many credit card issuers will gladly work with their debtors and work out settlements or payment plans directly, without the intervention of debt settlement companies.
      This helps them to collect more than what they’d get from a 3rd party settlement company and it will also mean that you are paying them more of what you owe them, which is a good thing. It will also protect you from litigation should the credit card issuer grow tired of you avoiding them at a debt settlement company’s request.
    • Pay down your debt to no more than 10% – The new FICO score, FICO 08, is more sensitive about your revolving utilization percentage, which is the relationship between your balances and limits on credit card accounts. This means those of you who are highly utilized will suffer more as lenders continue to convert to this newer credit score, and many have already made the switch. If you can’t get your balances to less than 10% of your credit limits then get them as low as possible and your score will benefit. Why is this important? It’s simple. Lenders are being more critical about credit scores than in the past 36 months. A good score, say 700, two years ago would have gotten you approved at their best deal a lender had going. Today it will get you approved but not with the best terms. Shoot for 750 to ensure you of the best terms. And, be aware that mortgage lenders not only want 750 but they also want a larger down payment in many cases.


  • More Cards Are Better, Shoot for Five –This is counter intuitive but we’re living in a bizarre credit world. Those of you who have less than five credit cards are in a bad position. A bad position because of a couple of reasons, which are:
    • You have fewer options if one of your credit card issuers changes your terms – Tens of millions of consumer have seen the terms of their credit card accounts changed adversely over the past 18 to 24 months. This means lower credit limits, higher rates, higher minimum payments and closed accounts in some cases. If you have only one or two cards then you leave yourself without options should one or more of your credit card issuers start misbehaving. And for those of you who think you’re immune from this because you have good FICO scores, think again. FICO released a study several months ago that showed that, at a 2 to 1 ratio, cardholders who saw their credit limits decreased had median FICO score of 770. Nobody is immune. With more cards you give yourself the option to move your business elsewhere and not lose the access to the capital that a credit card provides.
    • Think About Litigation If You Know You’re Right –
      Fair Debt Collection Practice Act (FDCPA) lawsuits are going to eclipse 8,500 this year, which will easily be a record. According to John Ulzheimer, a professional expert witness, “many consumer are finding that they can’t get legitimate errors corrected on their credit reports. The choice they have is to live with it for seven years or take someone to court and force them to listen.”Many collection agencies are finding it hard to avoid lawsuits despite a huge growth in outstanding delinquent receivables. Some are calling for a revamping if the FDCPA but any politician that chooses to reduce consumer protections at this time in history is asking to be voted out of office.




is NOT Sub-Prime





The New “Sub-Prime” Mortgage





The New “Sub-Prime” Mortgage




  • $710,000 Loan Amount                     
  •  10% Down Payment             
  •  6 months on the job w/ training
  •  45/51 Ratio
  •  Mid Score 652




  •  Conventional  Loan
  •  25% Down Payment
  •  45% Max Ratio
  •  2 years in current position





  • 30 AND 15 YEAR FIXED


  •  5/1, 3/1 CMT ARMS
















  • $710,000 Loan Amount                     
  •  10% Down Payment             
  •  6 months on the job w/ training
  •  45/51 Ratio
  •  Mid Score 652




  •  Conventional  Loan
  •  25% Down Payment
  •  45% Max Ratio
  •  2 years in current position




  • 620 Credit Score        
  •  BKs and Foreclosure, 3 year seasoning                   
  •  46/53 Ratios  w/AUS Approve                                
  •  3.5% Minimum Down Payment                              
  •  All Gift , from Family, Employer, Non-Profit
  •  Loan from Family, Employer or Non-Profit                       
  •  100% CLTV                                                             
  •  Non Occupant Co-Borrowers to qualify                  
  • “ AS-IS” Properties







Examples of property conditions that WILL require inspections


  •  Termite Report with Clearance :


  •  Purchase Contract requires and is ratified by all parties
  •  Visible infestation noted by Fee Inspector on the URAR
  •  Underwriter’s discretion


  •  Roof Report with Roof Certification


 Evidence of current or prior leakage or damage




Examples of property conditions that NO longer require repair


  • Missing handrails
  • Cracked or damaged exit doors that are otherwise operable
  • Cracked window glass
  • Defective paint surfaces in homes built after 1978
  • Minor plumbing leaks
  • Defective floor finish or covering
  • Evidence of previous (non-active) termites
  • Rotten or worn out counter tops
  • Damaged plaster, sheetrock or other wall and ceiling materials
  • Poor workmanship
  • Trip hazards
  • Crawl space with debris and trash
  • Lack of an all weather driveway surface
  • Reversal of unpermitted addition or garage conversation




  • Minimum Credit Score Required….620



  •  Lowest “mid” score for all borrowers



  •  No minimum number of trade lines
    • Must have DU Approve
    • Verification of Rent not required (w/ DU)
    • Non Traditional Credit Not Allowed



  • Chapter 7 BK  and Foreclosures OK over 3 years
    • Under 3 years with extenuating circumstances
    • Manual underwrite required



  • Chapter 13 and Consumer Counseling OK
    • w/ 12 month perfect payment
    • written permission for court or administrator



  • Short Sale NOT treated as foreclosure





  • Revolving Debts CAN be paid off to qualify



  • 401K loans not considered in qualifying



  • Spouses debts considered in qualifying
    •  Spouse’s score not a factor
    •  Community Property States Only





  • Ratios as high as 55%

              with DU Approval



  • Manual Underwrite available with ratios 33/43



  • Non Occupant Co-borrowers can be used to qualify
    • Must be family member or

                                    establish close relationship



  • Occupant Ratios not considered a factor





3.5% Minimum Down Payment Required


  • 100% Gift OK for down payment & CC


  • Family member or close relationship


  • Employer


  • Acceptable Non Profit







  • Secondary Financing Allowed to 100% CLTV


  • Family member
  • Employer
  • Approved City/County Seconds
  • Government Agencies



  • Seller can pay up to 6% towards closing costs

             regardless of LTV





  • Self Employed borrowers under 2 year OK


  •  Second Jobs w/ less than 2 years OK


  •  Commission Earning w/ less than 2 years OK


  •  Projected Income Ok to qualify


  •  Explained employment gaps ok on

              FHA High Balance too!


The Meredith Mortgage Team

Erin Meredith 925.918.0585

Kathleen Meredith 925.735.6621


Fannie Makes Additional Changes…Impact for Relocating Employees?

Fannie Mae is scheduled to make several additional changes to borrower eligibility, underwriting requirements and available products in hopes to further support the sustainability of the housing market. 

Two of the biggest changes will occur in the areas of credit score and debt-to-income (DTI) ratios. Fannie Mae is raising the minimum qualifying credit score to 620 from a minimum of 580. This will affect loans that are submitted to an automated underwriting engine as well as with all manually underwritten loans. This minimum credit score requirement will apply to all mortgages that are delivered to Fannie Mae including conventional loans and loans insured or guaranteed by a federal government agency such as FHA or VA. 

In an effort to support sustainable homeownership for borrowers, the maximum DTI or allowable total expense ratio will be reduced to 45%. This is a substantial decrease because up until recently, DTI ratios were allowed to go almost as high as 60%. On certain loan files with strong compensating factors, there will be the potential flexibility to go as high as 50%. 

It is highly recommended that relocating employees contact their mortgage lender and get pre-approved as soon as possible once they know a relocation is in their future. This will provide them a clearer understanding of what they can truly afford or what they may need to do in order to purchase their new home.