Common Foreclosure Sales Misconceptions

Although distressed sales (Foreclosures and Short Sales) account for over 50% of the California market right now, many home buyers still have a negative perception of them. I work with distressed sales on a daily basis all over the state of California and I see new buyers taking advantage of extraordinary opportunities buying distressed homes.

Here are some common misconceptions I hear from home buyers:

·         All distressed sales are in horrible condition.

Some distressed sales are in move-in-ready, turnkey condition. It is common for the new owner (HUD, Fannie Mae, a bank or investor of some kind) to rehabilitate the home to get a better sales price.

·         If you buy a distressed sale, you have to pay the back taxes and unpaid HOA fees.

Title insurance is required when you finance your new home. Title insurance will guarantee clear title free of the previous loans and liens. Beware if you plan to buy a foreclosure at auction off the court house steps. These purchases require cash and offer no guarantee of clear title. Make sure to research title prior if you decide to go this route.

·         Distressed sales always sell at a discount.

The price of a distressed sale depends on the same factors as a traditional sale. Buyers and sellers eventually determine the sales price. A distressed sale in a great location that’s move-in-ready will have multiple interested buyers. Multiple buyers with their multiple offers will push to sales price up. Many buyers make the mistake of assuming they are the only buyer making an offer on a distressed home and put in low ball offers only to be disappointed when another offer is accepted at a higher offer price.

http://www.thefranklinadvantage.com/Purchases.php

5% Down With No PMI?

Is there really a loan available that offers only 5% down payment with no PMI?

Yes, sorta…

Lender Paid Mortgage Insurance or LPMI is a way to avoid paying traditional mortgage insurance (PMI). In return for a small increase to your interest rate, the lender will pay the mortgage insurance for you.

This benefits you the borrower in that the payment on this type of loan is usually lower than a traditional loan with Private Mortgage Insurance (PMI).

LPMI is not for everyone. If you plan on keeping your home for the life of the loan, you are locked into a great fixed interest rate and never have any plan of refinancing that mortgage then it may be better to pay the PMI instead of the Lender paid mortgage insurance. Depending on your lender and their guidelines, you may be able to drop the PMI once your loan reaches either 78% or 80% of your home’s value.

With LPMI you are stuck with the increase to your interest rate for the life of the loan.

Call Franklin Advantage for more details on LPMI.    (800) 314-5626

Don't Blame the Appraiser

The Appraisal Institute, in a press release the Institute said, " Don't blame the real estate appraiser if it turns out that house you're trying to sell or buy isn't worth what you thought it was."

    

President Sara W. Stephens, MAI said that real estate agents, homebuilders and others have placed blame for the market's distressed condition on appraisers who produce opinions of value that don't match a home's listing, contract or sales price, delaying a recovery in the housing market and called that accusation "nonsense." She said,"The fact is that appraisers are undertaking the same thorough research and thoughtful analysis that they always have in order to continue producing reliable, credible opinions of value."

  

Stephens pointed out that buyers and sellers often have emotional value attached to a home or are unaware of the market. She also noted that appraisals completed for mortgage transactions are used to assist lenders, who are the clients, not buyers or sellers, in making lending decisions - and are not intended to confirm a listing, contract or sales price. There's no reason to assume the contract price is the "correct" price simply because it's higher than the appraisal.

    

The Institute also released two handouts.  The first explains the process of conducting an appraisal in a declining market and includes a discussion of how an appraiser discounts a distressed comp. The second handout attempts to explain what an appraisers job really is, making the points that:

• Appraisals aren't intended to confirm a home's sales price.
• Appraisers don't set the real estate market; they reflect what's happening in the market.
• Appraisers work not for buyers or sellers, but for lenders.
• Appraisers are independent, third-party experts with no motive to be biased.
• Appraisals sometimes are assigned to the least qualified, least competent appraisers, but especially in a distressed market, competent and qualified appraisers - such as designated members of the Appraisal Institute - should be hired for difficult assignments.
• Appraisers know how to use distressed sales as comparables

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Fannie Mae Says Sales Higher in 2012

Fannie Mae released a forecast Friday that said home sales will improve this year. Sales of new and existing homes are likely to increase 3.5 percent according to the report. It says that this increase will contribute “modestly” to economic expansion after acting as a drag on growth since 2006.

“With an expected improvement in housing activity in 2012, residential investment should start contributing to growth, albeit only modestly initially,” Douglas Duncan, Fannie Mae’s chief economist, and Orawin Velz, a director in its Economics and Mortgage Market Analysis group wrote.

In an interview with Bloomberg News, Duncan said that the housing market has been held back by weak demand as high unemployment and concerns about job security prevent buyers from taking advantage of falling home prices and borrowing costs.

The report also says that mortgage rates will continue to provide support for the market, rising only slightly in 2012. The average rate for a 30-year fixed loan fell to 3.89 percent in the week ended yesterday, the lowest in records dating to 1971.

If you haven’t been pre-approved for a home loan or would like Franklin Advantage to update your pre-approval; drop us a line.

(800) 314-5626
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Budget Deal Pushes Rates Up in April

I hope you had an enjoyable holiday.

Do remember the budget battle the President and Congress had over the holidays? If you recall, the President wanted to extend the expanded unemployment benefits (now at 99 weeks) and continue the payroll tax cuts (currently at 4.2% but it was set to expire and go back to 6.2%) but congress refused to extend as it would increase the deficit.

They eventually reached a deal… I seem to recall it was on the 23rd of December. The deal was that they would continue the emergency unemployment benefits and the payroll tax cut for 2 months and it would be paid for by increasing the insuring fee on Fannie Mae and Freddie Mac mortgages.

What is the insuring fee? It’s a fee that Fannie and Freddy charge backs to insure their loans. How much will it increase? .1% How will this affect interest rates on Fannie Mae and Freddy Mac loans in the future? They will go up by .1%.

Hopefully the downward trend in rates will absorb this.

FHA Extends Anti Flipping Waiver

Good news!

In an effort to continue stabilizing home values and improve conditions in communities experiencing high foreclosure activity, Acting Federal Housing Administration (FHA) Commissioner Carol J. Galante will extend FHA's temporary waiver of the anti-flipping regulations.

With certain exceptions, FHA regulations prohibit insuring a mortgage on a home owned by the seller for less than 90 days. In 2010, FHA temporarily waived this regulation through January 31, 2011, and later extended that waiver through the remainder of 2011. The new extension will permit buyers to continue to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. It will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

The extension is effective through December 31, 2012, unless otherwise extended or withdrawn by FHA. All other terms of the existing Waiver will remain the same. The Waiver contains strict conditions and guidelines to prevent the predatory practice of property flipping, in which properties are quickly resold at inflated prices to unsuspecting borrowers. The Waiver continues to be limited to sales meeting the following conditions:

• All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
• In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the Waiver will only apply if the lender meets specific conditions and documents the justification for the increase in value.

The Waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

California Home Sales Pick Up in November

The Los Angeles Times:

California's housing market showed some signs of luster in November with sales picking up over the same month last year, but prices declined and foreclosures remained prevalent.

Sales fell 4.2% from October, although they commonly decline from October to November, and compared with November 2010, they were up 4%, according to real estate research firm DataQuick. A total of 32,669 homes sold last month, which is about 18% below the average for November since 1988, when DataQuick's statistics begin.

The state's median home price was $244,000, up 1.7% from October and down 4.3% from November 2010.
http://latimesblogs.latimes.com/money_co/2011/12/californias-home-sales-up-40-in-november.html

FHA and VA Loan Limits Extended

President Barack Obama signed a bill Friday that reinstates the recently expired higher loan limits that were in effect for FHA and VA loans through December 31, 2013 but does not provide this extension to Freddie Mac and Fannie Mae.

Unless something changes, it looks like FHA and VA loans will have higher loan amounts available with only 3.5% and 0% down than Fannie and Freddy conventional loans that require 10% down at the higher loan amounts.

Demand, Low Rates and Cheap Homes Drive Market Up

Sales of existing homes rose 7.7% last month as buyers, lured by rock-bottom prices and rock-bottom interest rates jumped back into the housing market.

Compared to a year ago, the rate of home sales has surged 18.6% from a lethargic 4.24 million homes.

Even though economists had expected August sales to come in at a rate of 4.7 million homes; sales rose to an annual rate of 5.03 million homes, from 4.67 million homes in July, according to the National Association of Realtors.

Last week, 30-year mortgages hit a record low. FHA and VA 30 year fixed rate loans dropped below 4%.

Ron Phipps, president of NAR said, "All year, the relationship between home prices, mortgage interest rates and family income has been hovering at historic highs, meaning the best housing affordability conditions in a generation."

0:00 / 2:11 Million dollar homes the middle class can afLawrence Yun, NAR chief economist said in a written statement that rising costs of renting are also drawing Americans into the home buying market. Yun also said, "Investors were more active in absorbing foreclosed properties… In addition to bargain hunting, some investors are in the market to hedge against higher inflation."

Housing is making strong gains as pent up demand, low interest rates and homes offered at prices that are cheaper than construction have combined to make home ownership a wise investment

Rock Bottom Mortgage Rates?

Is this what rock bottom looks like?

30 year fixed rates are now available under 4%.

Today you can get a conforming (at or under $417,000 loan amount) 30 year rate FHA loan at 3.75% at less than 1 point cost.

Mortgage rates have plunged to all-time lows amid concerns the economy is stalling again, Freddie Mac said in its weekly survey.

Lenders were offering the 30-year fixed-rate home loan at an average rate of 4.12% this week, down from 4.22% last week, Freddie Mac said Thursday.

"On net, the economy added no new jobs last month and was the weakest reading since September 2010," Frank Nothaft chief economist of Freddie Mac said.

"Meanwhile, the unemployment rate remained at 9.1%, marking its 31st consecutive month of being above 8%, the longest such stretch in 70 years."

Carpe Diem! Seize the day! While others hesitate, take advantage of low rates and homes the most affordable homes in two generations.

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