Most mortgage financing plans provide only permanent financing. That is, the lender will not usually close the loan and release the mortgage proceeds unless the condition and value of the property provide adequate loan security. When rehabilitation is involved, this means that a lender typically requires the improvements to be finished before a long-term mortgage is made.
When a homebuyer wants to purchase a house in need of repair or modernization, the homebuyer usually has to obtain financing first to purchase the dwelling; additional financing to do the rehabilitation construction; and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage.
The Section 203(k) program was designed to address this situation. The borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property. To provide funds for the rehabilitation, the mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work. To minimize the risk to the mortgage lender, the mortgage loan (the maximum allowable amount) is eligible for endorsement by HUD as soon as the mortgage proceeds are disbursed and a rehabilitation escrow account is established.
The Section 203(k) program is HUD’s primary program for the rehabilitation and repair of single family properties (to be eligible, the property must be a one to four family dwelling that has been completed for at least one year). Homes that have been demolished, or will be razed as part of the rehabilitation work, are eligible provided some of the existing foundation system remains in place.
Many lenders have successfully used the Section 203(k) program in partnership with state and local housing agencies and nonprofit organizations to rehabilitate properties. These lenders, along with state and local government agencies, have found ways to combine Section 203 (k) with other financial resources, such as HUD’s HOME, HOPE, and Community Development Block Grant Programs, to assist borrowers.
The Section 203(k) program is an excellent means for lenders to demonstrate their commitment to lending in lower income communities. HUD is committed to increasing homeownership opportunities for families in these communities. www.hud.gov
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Tuesday, September 21, 2010
Thursday, September 9, 2010
Homeowners Current on payments but Negative Equity get help
The Obama Administration on Tuesday unveiled a new plan to help homeowners who are underwater on their mortgages, according to a story in the Wall Street Journal.
The program targets between 500,000 to 1.5 million negative equity mortgages, where the homeowner owes more than his or her home is worth.
The first initiative of the program is for homeowners who are current on their mortgages but at risk of default because of sinking home values, the Journal said.
Under the program, banks and lenders will write off the home's value to less than the value of the property and then hand off the reduced loan to the government. The program essentially refinances underwater homeowners into loans backed by the Federal Housing Administration.
About 11 million mortgages or 23 percent of U.S. households with a mortgage are in a negative equity position, according to CoreLogic.
The program targets between 500,000 to 1.5 million negative equity mortgages, where the homeowner owes more than his or her home is worth.
The first initiative of the program is for homeowners who are current on their mortgages but at risk of default because of sinking home values, the Journal said.
Under the program, banks and lenders will write off the home's value to less than the value of the property and then hand off the reduced loan to the government. The program essentially refinances underwater homeowners into loans backed by the Federal Housing Administration.
About 11 million mortgages or 23 percent of U.S. households with a mortgage are in a negative equity position, according to CoreLogic.
Thursday, August 26, 2010
Little Valley Area Building Plans for High Density Housing
Bonneville Builders of Salt Lake City has plans to build high-density housing in the Little Valley area. It has been rejected twice by the city. However, Bonneville Builders wants to be heard before the City Council. No date has been set for the meeting, but after speaking with Bonneville Builders they plan on continuing to try and get approval. The area they want to build the high density housing is next to Little Valley Elementary and Sunrise Ridge Intermediate. You might be wondering, "What is high density housing?"
High Density Housing definitions from the web
* An apartment, or flat, is a self-contained housing unit that occupies only part of a building. Such a building may be called an apartment building, especially if it consists of many apartments for rent. Apartments may be owned by an owner/occupier or rented by tenants.
* Over 60 dwellings per hectare and generally five stories or more high, for example apartment buildings.
What is the reasoning for the high density housing? To build more affordable housing.
More questions to consider?
How will this affect our market values?
What type of housing will this be? Apartments? Townhomes? SFD?
What will the price range be?
I am very curious about how this will play out in the future and I will keep you up to date on this process. If you should have any further questions please call me at (435) 313-6708.
The two pictures are of homes in the Salt Lake City area, in the subdivision Daybreak. Bonneville Builders said, the homes would be similar to the homes in this subdivision
If you are interested in Real Estate in St.George, Utah please call me at 435-313-6708 or visit my website at: http://www.paulsellsdixie.com/
Monday, August 23, 2010
FANNIE & FREDDIE
The government’s twin housing behemoths—Fannie Mae and Freddie Mac—cannot simply be cut lose from government support. Like animals kept too long in captivity, Fannie and Freddie will not be able to survive in the wild. This is something that supporters of Fannie and Freddie have right - government support is absolutely necessary for their existence. But that doesn’t mean we should continue the government life-support.
In fact, there is good reason to end government support for the agencies and let them wither away. The truth is that there is nothing that Fannie and Freddie do that private companies couldn’t do better—except provide an illusory subsidy for homebuyers. And there are far better ways to subsidize housing than propping up Fannie and Freddie.
Fannie and Freddie are supposed to make housing more affordable by buying up mortgages and providing guarantees for mortgages that conform to the guidelines developed by bureaucrats. Mortgage lenders are willing to make loans at cheaper rates when part of the risk of default is absorbed by someone else.
That’s it. That’s really the only way that Fannie and Freddie save homebuyers money—by taking on the risks of making mortgages that would otherwise sit with the lenders. The lenders then pass on the savings to homebuyers by providing mortgages at slightly lower rates.
But if Fannie and Freddie are just big insurance companies for mortgage lenders, there’s no reason that this couldn’t be done by private markets. Insurance is a huge business in the United States. And mortgage insurance is, in fact, available from private companies.
The main advantage Fannie and Freddie have is access to cheap capital. Even before they were put into government conservatorship, Fannie and Freddie could borrow money from debt investors at rates far cheaper than private competitors because they enjoyed the implicit guarantee of the United States government. Debt investors assumed—correctly, it turns out—that if these companies got in trouble, the U.S. taxpayer would assure that they could pay off their debts.
Now that they have access to government bailout capital, the advantage is even larger. Last quarter, Fannie owed $1.9 billion in dividends to the Treasury. It couldn’t make the payments, so it requested $1.5 billion from the Treasury to pay back the Treasury. For real. That’s what happened.
Access to cheap, government guaranteed debt and equity means that Fannie and Freddie can provide guarantees to mortgage lenders far cheaper than any private company can. And that’s the source of the subsidy for homebuyers: Fannie and Freddie undercut competition by providing mortgage insurance far cheaper than the market allows for private companies.
Absent the government guarantee and attendant cheap funding, there would be no reason for Fannie and Freddie to exist. They’d no longer be able to undercut private competition. In all likelihood, the leaner, more efficient private competitors would clean their clocks.
Fannie and Freddie would die—or be transformed into ordinary companies with no special role to play in the housing market.
Unfortunately, we do not know how to cut Fannie and Freddie off from the government guarantee. Prior to the crisis, government officials often insisted there was no guarantee of Fannie and Freddie—but no one believed them and the officials turned out to be either mistaken or lying.
Now—after the bailout—the government lacks all credibility on Fannie and Freddie. As long as they exist, Fannie and Freddie will enjoy a competition killing advantage that will undermine any attempt to create a healthy mortgage market not dependent on government subsidies. By John Carney, Senior Editor, CNBC.com
To read more of this article go to .www.cnbc.com
In fact, there is good reason to end government support for the agencies and let them wither away. The truth is that there is nothing that Fannie and Freddie do that private companies couldn’t do better—except provide an illusory subsidy for homebuyers. And there are far better ways to subsidize housing than propping up Fannie and Freddie.
Fannie and Freddie are supposed to make housing more affordable by buying up mortgages and providing guarantees for mortgages that conform to the guidelines developed by bureaucrats. Mortgage lenders are willing to make loans at cheaper rates when part of the risk of default is absorbed by someone else.
That’s it. That’s really the only way that Fannie and Freddie save homebuyers money—by taking on the risks of making mortgages that would otherwise sit with the lenders. The lenders then pass on the savings to homebuyers by providing mortgages at slightly lower rates.
But if Fannie and Freddie are just big insurance companies for mortgage lenders, there’s no reason that this couldn’t be done by private markets. Insurance is a huge business in the United States. And mortgage insurance is, in fact, available from private companies.
The main advantage Fannie and Freddie have is access to cheap capital. Even before they were put into government conservatorship, Fannie and Freddie could borrow money from debt investors at rates far cheaper than private competitors because they enjoyed the implicit guarantee of the United States government. Debt investors assumed—correctly, it turns out—that if these companies got in trouble, the U.S. taxpayer would assure that they could pay off their debts.
Now that they have access to government bailout capital, the advantage is even larger. Last quarter, Fannie owed $1.9 billion in dividends to the Treasury. It couldn’t make the payments, so it requested $1.5 billion from the Treasury to pay back the Treasury. For real. That’s what happened.
Access to cheap, government guaranteed debt and equity means that Fannie and Freddie can provide guarantees to mortgage lenders far cheaper than any private company can. And that’s the source of the subsidy for homebuyers: Fannie and Freddie undercut competition by providing mortgage insurance far cheaper than the market allows for private companies.
Absent the government guarantee and attendant cheap funding, there would be no reason for Fannie and Freddie to exist. They’d no longer be able to undercut private competition. In all likelihood, the leaner, more efficient private competitors would clean their clocks.
Fannie and Freddie would die—or be transformed into ordinary companies with no special role to play in the housing market.
Unfortunately, we do not know how to cut Fannie and Freddie off from the government guarantee. Prior to the crisis, government officials often insisted there was no guarantee of Fannie and Freddie—but no one believed them and the officials turned out to be either mistaken or lying.
Now—after the bailout—the government lacks all credibility on Fannie and Freddie. As long as they exist, Fannie and Freddie will enjoy a competition killing advantage that will undermine any attempt to create a healthy mortgage market not dependent on government subsidies. By John Carney, Senior Editor, CNBC.com
To read more of this article go to .www.cnbc.com
Monday, August 9, 2010
FORECLOSURES EXPECTED TO RISE
St. George—While Washington County real estate experts are citing a temporary decline in foreclosure activity this summer, banks are expected to claim distressed properties with renewed focus in the fall, with 3,000 additional residential foreclosures anticipated during the next 12 months.
Amid widespread economic and financial instability, some lenders have reduced their foreclosure activity in Washington County, said Allan Carter, director of Developer Services for Southern Utah Title.
“The foreclosing lenders are baffled on how to solve the problem,” Carter said, with many residents unable to make their mortgage payments. “They’ve taken a little bit of a reprieve in Washington County.”
County property records support Carter’s theory, with approximately 192 notices of default, the first step in the foreclosure process, recorded in Washington County from July 1 to July 29 among all property types, representing a significant drop from the 293 default notices documented during the same period last year.
From July 1 to July 29, Washington County recorded 118 foreclosures among all property types, essentially remaining flat with last year’s figure of 121.
Although the decline in default notices offers a welcome breather from the inflated level of activity experienced in recent months, Carter said the decline is little more than a temporary respite, expecting lenders to return in full force this fall in an effort to claim their assets.
“We expect that the aggressive nature of foreclosures will pick up steam as we get into the fall and winter,” he said. “Lenders are back off vacation, the unemployment picture isn’t changing significantly and they have to capitalize their banks by getting rid of this inventory.”
Carter said Washington County’s foreclosure rate is likely to reach its peak in 2011, with another 3,000 residential foreclosures anticipated in the next 12 months.
“It will be one of the largest years for foreclosures,” he said of 2011.
Kathy Nielsen, President of the Washington County Board of Realtors, said she also anticipates continued foreclosure activity in the coming months.
Jeremy Larkin, a local Realtor with Keller Williams Realty, said the recent decline in foreclosure activity is an encouraging sign for the market, although he does not expect the region’s continued difficulties with bank-owned properties to subside anytime soon. “I hope that this thing gets under control in the next 12 to 18 months,” he said.
Although activity has temporarily subsided this summer, Washington County is on pace to surpass 2009 foreclosure figures, according to county records.
The county recorded 882 foreclosures among all property types this year, from January 1 to July 29, a noticeable increase from the 716 recorded during the same time frame in 2009.
In only 7 months, Washington County has surpassed the total number of foreclosures recorded in 2008.
This year’s foreclosure total is destined to grow this fall when lenders resume aggressive foreclosure activity with a renewed sense of focus, Carter said.
“We really expect to see foreclosures run unimpeded,” he said.
By Scott Kerbs/The Spectrum
Amid widespread economic and financial instability, some lenders have reduced their foreclosure activity in Washington County, said Allan Carter, director of Developer Services for Southern Utah Title.
“The foreclosing lenders are baffled on how to solve the problem,” Carter said, with many residents unable to make their mortgage payments. “They’ve taken a little bit of a reprieve in Washington County.”
County property records support Carter’s theory, with approximately 192 notices of default, the first step in the foreclosure process, recorded in Washington County from July 1 to July 29 among all property types, representing a significant drop from the 293 default notices documented during the same period last year.
From July 1 to July 29, Washington County recorded 118 foreclosures among all property types, essentially remaining flat with last year’s figure of 121.
Although the decline in default notices offers a welcome breather from the inflated level of activity experienced in recent months, Carter said the decline is little more than a temporary respite, expecting lenders to return in full force this fall in an effort to claim their assets.
“We expect that the aggressive nature of foreclosures will pick up steam as we get into the fall and winter,” he said. “Lenders are back off vacation, the unemployment picture isn’t changing significantly and they have to capitalize their banks by getting rid of this inventory.”
Carter said Washington County’s foreclosure rate is likely to reach its peak in 2011, with another 3,000 residential foreclosures anticipated in the next 12 months.
“It will be one of the largest years for foreclosures,” he said of 2011.
Kathy Nielsen, President of the Washington County Board of Realtors, said she also anticipates continued foreclosure activity in the coming months.
Jeremy Larkin, a local Realtor with Keller Williams Realty, said the recent decline in foreclosure activity is an encouraging sign for the market, although he does not expect the region’s continued difficulties with bank-owned properties to subside anytime soon. “I hope that this thing gets under control in the next 12 to 18 months,” he said.
Although activity has temporarily subsided this summer, Washington County is on pace to surpass 2009 foreclosure figures, according to county records.
The county recorded 882 foreclosures among all property types this year, from January 1 to July 29, a noticeable increase from the 716 recorded during the same time frame in 2009.
In only 7 months, Washington County has surpassed the total number of foreclosures recorded in 2008.
This year’s foreclosure total is destined to grow this fall when lenders resume aggressive foreclosure activity with a renewed sense of focus, Carter said.
“We really expect to see foreclosures run unimpeded,” he said.
By Scott Kerbs/The Spectrum
Tuesday, July 27, 2010
MORE CHANGE IS COMING
They say the only constant is change... And more change is coming, as the sweeping Financial Regulation Bill was passed by the Senate last week and will be signed by President Obama in short order to become law. So what does this change mean... and how will it impact home loan rates? Here's what you need to know.
The Bill calls for a new consumer protection agency and prohibits Banks from taking risky bets. While those things are important, it's also important to realize that this legislation... over 2,000 pages worth... amazingly does nothing to address the core reasons for the financial collapse. Fannie Mae and Freddie Mac are completely left out of this legislation. The credit rating agencies, who may have played the largest role in the financial collapse, also go unmentioned.
In fact, when former Fed Chairman Alan Greenspan was asked about the Financial Regulation Bill, he noted that this was the first time the Fed was not asked to write a regulation of this kind. He also said that there are "unintended consequences" in every page of this bill.
What all this will mean for our economy and home loan rates remains to be seen... which is why now is the perfect time to act, while home loan rates continue to be some of the best they have ever been!
Banks seem to be creating two classes of troubled homeowners. Those who are falling behind in their payments are being allowed to stay in their homes longer because lenders are reluctant to ad to the glut of foreclosed homes on the market. At the same time, lenders are stepping up repossessions to clear out the backlog of bad loans.
On average, it takes about 15 months for a home loan to go from being 30 days late to the property being or foreclosed and sold, according to Lender Possessing Services Inc., which tracks mortgages.
The number of homeowners that received a legal warning that they could lose their homes in the first half of the year climbed 8 percent from the same period last year. But the rate dropped 5 percent from the last six months of 2009, according to RealtyTrac, which tracks notices for defaults, scheduled home auctions and home repossessions.
About 1.7 million homeowners received a foreclosure-related warning, between January and June. That translates to one in 78 U.S. homes.
Nevada posted the highest foreclosure rate in the first half of the year. Arizona, Florida, California and Utah were among the other foreclosure hotbeds.
The Bill calls for a new consumer protection agency and prohibits Banks from taking risky bets. While those things are important, it's also important to realize that this legislation... over 2,000 pages worth... amazingly does nothing to address the core reasons for the financial collapse. Fannie Mae and Freddie Mac are completely left out of this legislation. The credit rating agencies, who may have played the largest role in the financial collapse, also go unmentioned.
In fact, when former Fed Chairman Alan Greenspan was asked about the Financial Regulation Bill, he noted that this was the first time the Fed was not asked to write a regulation of this kind. He also said that there are "unintended consequences" in every page of this bill.
What all this will mean for our economy and home loan rates remains to be seen... which is why now is the perfect time to act, while home loan rates continue to be some of the best they have ever been!
Banks seem to be creating two classes of troubled homeowners. Those who are falling behind in their payments are being allowed to stay in their homes longer because lenders are reluctant to ad to the glut of foreclosed homes on the market. At the same time, lenders are stepping up repossessions to clear out the backlog of bad loans.
On average, it takes about 15 months for a home loan to go from being 30 days late to the property being or foreclosed and sold, according to Lender Possessing Services Inc., which tracks mortgages.
The number of homeowners that received a legal warning that they could lose their homes in the first half of the year climbed 8 percent from the same period last year. But the rate dropped 5 percent from the last six months of 2009, according to RealtyTrac, which tracks notices for defaults, scheduled home auctions and home repossessions.
About 1.7 million homeowners received a foreclosure-related warning, between January and June. That translates to one in 78 U.S. homes.
Nevada posted the highest foreclosure rate in the first half of the year. Arizona, Florida, California and Utah were among the other foreclosure hotbeds.
Tuesday, June 15, 2010
REAL ESTATE TRENDS & FORECASTS
At a recent luncheon of the St. George Chapter of the Women’s Council of Realtors, Vardell Curtis, Chief Executive Officer of the Washington County Board of Realtors, talked about real estate trends and forecasts. The following are some of the highlights of Vardell’s presentation:
Pending home sales have risen for three consecutive months, reflecting the broad impact of the home buyer tax credit and favorable housing affordability conditions. The forward-looking indicator rose 6 percent to a level of 110.9 based on contracts signed in April, from an upwardly revised 104.6 in March, and is 22.4 percent higher than the same month last year. The tax stimulus, combined with improved consumer confidence and low mortgage interest rates, are contributing to the surging sales. The housing market has to get back on it’s own feet and now appears to be in a good position to return to sustainable levels even without government stimulus, provided the economy continues to add jobs.
“The economy grew at a slower rate than originally reported in the first three months of the year, according to the Bureau of Economic Analysis, which suggest inflation will remain tame in the near term,” stated Frank Nothaft, chief economist for Freddie Mac. He continued by saying, “As a result, mortgage rates held at historic levels this week. In fact, rates on 15-year fixed-rate mortgages set another record low for the third week in a row.”
It remains a very attractive time to refinance a mortgage or buy a new home or foreclosed property, while recognizing that one in four U.S. homeowners is “underwater” on their mortgages...owing more than the home is worth. Mortgage rates could move higher later this year if global investor anxiety declines.
The Utah market is rebounding slowly. While some sectors of Utah’s economy are slowing heading toward the rebound track, real estate is still not there yet. And some local analysts predict it may be a while before it finally finds its way back onto the road to stability. The commercial real estate market may not even begin to recover until next year.
On the residential side, declining home values have pushed housing prices back to much more affordable levels. The lower end of the market (under $300,000) is recovering. We’ve probably seen a bottom or very close to a bottom in that part of the market. The middle part of the market is “a little bumpy” with the higher end “going to remain in a mess for some time to come.” There is just too much high-end real estate in the state….and we just don’t have people with the incomes and fundamentals that can support those higher payments.
Prices on the more expensive unsold inventory are falling more dramatically – on a percentage basis—than any other segment of the housing market. Eventually, the market could see more foreclosures or sort sales as those properties are no longer financially viable for their owners.
According to newly released data from CoreLogic on foreclosures for the St. George area, the rate of foreclosures among outstanding mortgage loans is 4.24 percent for the month of April, an increase of 1.04 percentage points compared to April 2009 when the rate was 3.2 percent. Foreclosure activity in St George is higher than the national foreclosure rate which was 3.20 percent for April 2010, representing a 1.04 percentage point difference.
Perhaps the best news for Washington County is progress in the residential housing market. Sales are booming as the market continues to adjust to more realistic prices. In addition, preliminary data for the first two months of 2010 shows approved home permits almost doubled the number permitted for the same months in 2009. Information courtesy of Vardell Curtis, CEO, WCBR
Pending home sales have risen for three consecutive months, reflecting the broad impact of the home buyer tax credit and favorable housing affordability conditions. The forward-looking indicator rose 6 percent to a level of 110.9 based on contracts signed in April, from an upwardly revised 104.6 in March, and is 22.4 percent higher than the same month last year. The tax stimulus, combined with improved consumer confidence and low mortgage interest rates, are contributing to the surging sales. The housing market has to get back on it’s own feet and now appears to be in a good position to return to sustainable levels even without government stimulus, provided the economy continues to add jobs.
“The economy grew at a slower rate than originally reported in the first three months of the year, according to the Bureau of Economic Analysis, which suggest inflation will remain tame in the near term,” stated Frank Nothaft, chief economist for Freddie Mac. He continued by saying, “As a result, mortgage rates held at historic levels this week. In fact, rates on 15-year fixed-rate mortgages set another record low for the third week in a row.”
It remains a very attractive time to refinance a mortgage or buy a new home or foreclosed property, while recognizing that one in four U.S. homeowners is “underwater” on their mortgages...owing more than the home is worth. Mortgage rates could move higher later this year if global investor anxiety declines.
The Utah market is rebounding slowly. While some sectors of Utah’s economy are slowing heading toward the rebound track, real estate is still not there yet. And some local analysts predict it may be a while before it finally finds its way back onto the road to stability. The commercial real estate market may not even begin to recover until next year.
On the residential side, declining home values have pushed housing prices back to much more affordable levels. The lower end of the market (under $300,000) is recovering. We’ve probably seen a bottom or very close to a bottom in that part of the market. The middle part of the market is “a little bumpy” with the higher end “going to remain in a mess for some time to come.” There is just too much high-end real estate in the state….and we just don’t have people with the incomes and fundamentals that can support those higher payments.
Prices on the more expensive unsold inventory are falling more dramatically – on a percentage basis—than any other segment of the housing market. Eventually, the market could see more foreclosures or sort sales as those properties are no longer financially viable for their owners.
According to newly released data from CoreLogic on foreclosures for the St. George area, the rate of foreclosures among outstanding mortgage loans is 4.24 percent for the month of April, an increase of 1.04 percentage points compared to April 2009 when the rate was 3.2 percent. Foreclosure activity in St George is higher than the national foreclosure rate which was 3.20 percent for April 2010, representing a 1.04 percentage point difference.
Perhaps the best news for Washington County is progress in the residential housing market. Sales are booming as the market continues to adjust to more realistic prices. In addition, preliminary data for the first two months of 2010 shows approved home permits almost doubled the number permitted for the same months in 2009. Information courtesy of Vardell Curtis, CEO, WCBR
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