Wednesday, April 21, 2010
Monday, April 5, 2010
Home Sales Conracts Leap Higher
By Annalyn Censky, staff reporter, April 5, 2010: 12:04 PM ET
NEW YORK (CNNMoney.com) -- Contracts for the sale of existing homes rose sharply in February, the National Association of Realtors' (NAR) said Monday.
In the single-biggest monthly rise since October 2001, pending home sales rose 8.2% in February. Economists were expecting a 1% decrease.
It was also a 17% improvement over February last year. The unexpected increase could indicate demand driven by the federal government's homebuyer tax credit, NAR said.
Buyers have to ink contracts by the end of April to take advantage of the tax credit, which offers first-time homebuyers up to $8,000, and those who are trading up as much as $6,500.
NAR's report measures signed real estate contracts, but not completed sales, for existing single-family homes, condos and co-ops. Pending home sales are considered a forward-looking indicator since many of the contracts don't result in completed transactions for many weeks or months.
The tax credit is not the only factor driving home sales: Improved consumer confidence and lower unemployment numbers are also likely to push the number higher over the next few months, said Robert Dye, a senior economist with PNC Financial Services.
"A lot of economic indicators are starting to move back into positive territory, and I think we're going to see a good number of homebuyers come into the market to take advantage of very favorable home prices, low mortgage rates and the tax credit," he said.
NEW YORK (CNNMoney.com) -- Contracts for the sale of existing homes rose sharply in February, the National Association of Realtors' (NAR) said Monday.
In the single-biggest monthly rise since October 2001, pending home sales rose 8.2% in February. Economists were expecting a 1% decrease.
It was also a 17% improvement over February last year. The unexpected increase could indicate demand driven by the federal government's homebuyer tax credit, NAR said.
Buyers have to ink contracts by the end of April to take advantage of the tax credit, which offers first-time homebuyers up to $8,000, and those who are trading up as much as $6,500.
NAR's report measures signed real estate contracts, but not completed sales, for existing single-family homes, condos and co-ops. Pending home sales are considered a forward-looking indicator since many of the contracts don't result in completed transactions for many weeks or months.
The tax credit is not the only factor driving home sales: Improved consumer confidence and lower unemployment numbers are also likely to push the number higher over the next few months, said Robert Dye, a senior economist with PNC Financial Services.
"A lot of economic indicators are starting to move back into positive territory, and I think we're going to see a good number of homebuyers come into the market to take advantage of very favorable home prices, low mortgage rates and the tax credit," he said.
Friday, April 2, 2010
Seeking a loan modification? Here's a tool to help!
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Thursday, April 1, 2010
Don't foreclose! Do a short sale
This Virginia home was sold in a short sale. A new government program will make these transactions more common.NEW YORK (CNNMoney.com) -- Short sales are the hottest thing going in the distressed-property market, and the trend is expected to get even hotter in coming weeks, when the government starts handing out cash to encourage lenders to close these deals.
"Banks have ramped up short sale approvals," said Duane Legate of House Buyer Network, which connects short sellers with buyers. "They're hiring a lot of the people who once worked in the mortgage-lending industry and moved them over to short sales."These transactions, where lenders allow homeowners to sell their houses for less than they owe, accounted for 17% of all residential real estate sales in February, up from nearly 13% in November, according to a monthly real estate market survey by Campbell/Inside Mortgage Finance.
And Bank of America (BAC, Fortune 500), the country's largest mortgage servicer, has more than doubled the number of short sales it processed in recent months.
Elizabeth Weintraub, a Sacramento, Calif.-area real estate agent who handles many short sales, was amazed at how quickly a recent deal went through. "Bank of America approved it in 24 days," she said. "That flipped me out."
This is a huge change from even just six months ago when the short-sale market was stalled and most people would describe the process has real estate hell. Because lenders stand to lose so much on these transactions, they have been reluctant to make short sales happen, often waiting months before getting back to potential buyers.
"In the past, many short sales would never come to fruition and the ones that did averaged over half a year to complete," said Chris Saitta, CEO of Equator, which produces short sale software.
"Things would just fall into a black hole and not come out again," added Weintraub.
And even when banks did agree to the sale, the process could be further complicated if the original owner had a second mortgage.
In most cases, the first lender is repaid in full before any money flows to a second-lein holder. And because most distressed borrowers are severely underwater, there's usually nothing left to send on. As a result, second-lein holders are left holding the bag and have been killing many deals.
But that has been changing. For one thing, banks realize that they make out far better financially with a short sale than a foreclosure. "The lenders lose 50% on a foreclosure and only 30% on a short sale," said Glenn Kelman, founder of the real estate Web site Redfin. "And short sales offer a way to get distressed properties off their books quickly."
And on April 5, lenders and mortgage investors will have even more incentives to offer troubled borrowers short sales instead of foreclosing.
Under the new Home Affordable Foreclosure Alternatives program, borrowers will earn a $3,000 "relocation incentive" and servicers will get $1,500 for handling a short sale.
The investors who actually own the mortgage notes will get $2,000 in exchange for sharing proceeds of the short sales with any second-lien holders. And, finally, those second lien holders will receive up to $6,000 for releasing their claims.
Lenders participating in the program must also determine the market values of properties early on and inform the owners of just what price they're willing to accept. Then, if owners come back to the lenders with bonafide offers, they have to be accepted within 10 days.
Equator's Saiita anticipates a short sale explosion in response to the new program. "The challenge will be handling all the volume," he said.
The company has already tweaked its software, which 58 servicers use, to handle the new HAFA rules. And that should help reduce the time it takes to execute a sale, which currently averages 88 days.
The boom in short sales may accelerate the end to the foreclosure crisis by cleaning out the overhang of borrowers in distress and replacing them with more stable homeowners.
Plus, these sales are better for distressed borrowers because their credit scores suffer less. Going through a foreclosure can knock 200 points off a FICO score, twice as much as the penalty for a short sale.
Wednesday, March 31, 2010
Sales of vacation homes rise!
NAR: Vacation-home sales rise
By AndreaBrambila
Created 2010-03-31 11:47
NAR's 2010 Investment and Vacation Home Buyers Survey includes responses from residents in 1,930 randomly selected households who bought residential real estate in 2009. The association conducted the survey in March 2010 and controlled for age and income.
Vacation-home sales increased 7.9 percent to 553,000 in 2009 from 513,000 in 2008 [3], the report said. The market share for vacation homes rose to 10 percent, from 9 percent in 2008.
At the same time, investment-home sales declined 15.9 percent, to 940,000 last year from 1.12 million in 2008, the report said. The market share for such homes fell to 17 percent, from 21 percent in 2008.
"The typical vacation-home buyer is making a lifestyle choice, with nine out of 10 saying they intend to use the property for vacations or as a family retreat. Investment buyers primarily seek rental income," said Lawrence Yun, the association's chief economist, in a statement [4].
Sales of primary residences grew by 7.1 percent, to 4.04 million in 2009 from 3.77 million in 2008, the report said. With that increase, the share for second homes overall dipped to 27 percent in 2009, compared with 30 percent in 2008.
"First-time buyers were at record levels in 2009, with fewer sales of second homes," Yun said.
A quarter of vacation-home buyers plan to rent out their homes to others, compared to 59 percent of investment-home buyers. Only 19 percent of investment-home buyers hope to use the property as a family retreat. Slightly more investors (18 percent) than vacation-home buyers (13 percent) bought the property for a relative or friend to use.
According to the U.S. Census, the national vacancy rates in fourth-quarter 2009 were an estimated 10.7 percent for rental housing and an estimated 2.7 percent for homeowner housing. While the homeowner rate was not statistically different from the fourth quarter of 2008, the rental vacancy rate was 10.1 percent higher.
"The rental market is soft due to the economy, and investors realize it is much higher risk to secure occupancy in their rental property than in prior years,"said Alexis Eldorrado, managing broker of Eldorrado Chicago Real Estate.
About 8 percent of investment-home buyers vs. 26 percent of vacation-home buyers said they plan to use the property as a primary residence in the future, the report said.
The median home price for a primary residence fell 5.6 percent last year to $185,000, and the median price for investment properties also fell, by 2.8 percent to $105,000. About 15 percent of buyers paid all cash for their primary residences, and this was unchanged from 2008. All-cash buyers made up 48 percent of investment-home buyers, according to the latest survey, up from 42 percent in 2008.
Meanwhile, the median price for vacation homes rose 12.7 percent to $169,000, and 29 percent paid in cash. Even with a rise in vacation-home prices, some Realtors say their clients think now is a good time to buy.
"Ultimately (a vacation home) has been a dream for many, and with the sudden shift in market prices due to the economy, many people realize it is a good time to buy. People are buying today at prices from 10-12 years ago," Eldorrado said.
Regionally, half of vacation homes sold in 2009 were in the South, 21 percent in the West, 17 percent in the Midwest and 12 percent in the Northeast, the report said.
"I would say that (NAR's) data is pretty close to being spot on, with a couple of exceptions," said James Crumbaugh, CEO of Allison James Estate and Homes, which does business in 11 states and deals mostly in waterfront properties, beachfront condos, golf course communities and planned resort communities.
Those exceptions are Florida and California -- both areas whose prices Yun said have become especially attractive for buyers over the past year.
"In Southwest Florida, normally 70 percent of our business is in vacation homes or second homes. Most of these buyers plan on eventually retiring in Southwest Florida. However, the investors have (been) buying up the fire sales among these properties for the last year or so, and I would guess that close to 50 percent of these sales are now investor sales," Crumbaugh said.
"Prices are going up, and as a result the investors have determined that the bottom has passed. We are actually starting to see an inventory problem on the horizon for Southern California and Southwest Florida, so prices should continue to climb," he added.
Loren Sanders, a Realtor at Windermere Exclusive Properties in San Diego County, Calif., has seen a rise in both vacation home purchases and investment purchases. Distressed properties have played a key part in encouraging investment purchases, he said.
"The buy, fix and flip people are making good money, which draws more players."
Thursday, March 25, 2010
Bank of America Home Loan Forgiveness
Wednesday, March 24, 2010, 2:45pm EDT | Modified: Thursday, March 25, 2010, 7:49am
BofA to offer home-loan forgiveness
Charlotte Business Journal - by Adam O’Daniel Staff Writer
Bank of America Corp. launched a program Wednesday that will offer mortgage-principal forgiveness worth about $3 billion to 45,000 borrowers.
The program will be used with other bank and federal efforts to help struggling homeowners, such as the Home Affordable Modification Program and National Homeownership Retention Program.
Only borrowers already eligible for loan modifications will be considered for the new program. And BofA says it will contact borrowers with the offer because only a limited group of customers will be eligible. The program is intended to serve borrowers who owe at least 120 percent of their home’s value and are more than 60 days past due on mortgage payments.
Any forgiveness will depend on the borrower making on-time payments for up to five years. If the home’s value rises, the amount of principal forgiven may be reduced.
Bank of America Home Loans President Barbara Desoer says the purpose of offering principal forgiveness is to modify distressed mortgages at a better rate and to balance the interests of customers and investors.
“Many homeowners who owe considerably more on their mortgages than their homes are worth are reluctant to accept a solution that addresses only the amount of the payment without an accompanying reduction in the balance due on the loan,” Desoer said. “We believe by first addressing the significant underwater condition of some NHRP-eligible loans, the rates of customer acceptance of HAMP trial modifications and conversions to permanent modifications on those loans will be improved, and the homeowners will be more motivated to make payments.”
Desoer says the new policy “recognizes and addresses the interests of mortgage investors by ensuring that forgiveness is tied to the homeowner’s performance, reducing the probability of a future default under the modified terms, and adjusting the total amount to be forgiven in light of any gains in property values that might occur in an economic recovery.”
Here’s how the new policy works:
•BofA will contact eligible borrowers. No action is needed by customers.
•Borrowers must be underwater on their mortgage by at least 20 percent and be 60 days past due on payments.
•BofA will offer interest-free forbearance for principal loan amounts above the home’s value.
•That forbearance amount will be forgiven at a rate of 20 percent of its initial balance each year for three years.
•After three years, the loan will be reevaluated. Loans still exceeding the home’s value will continue to receive forgiveness. If the home’s value has increased during the three-year period, and the borrower is no longer underwater, then no more principal will be forgiven.
•Borrowers must make on-time payments to remain in the program.
BofA says principal reduction will be the first consideration in a loan modification. Then the bank will consider reducing interest rates if further assistance is needed.
Desoer says Charlotte-based BofA (NYSE:BAC) becomes the first major mortgage servicer to implement such a program. She says the program is needed because many underwater borrowers are reluctant to accept loan modifications unless a principal reduction is offered. But in trials, she says 30 percent of borrowers who declined a loan modification changed their mind when principal reduction was offered.
The new policy is far from a silver bullet for the housing crisis. Only 45,000 borrowers at BofA are estimated to be eligible — about 1.5 million borrowers are 60 days or more delinquent on payments, bank officials say.
Still, improving the rate of loan modifications is an important step for BofA because distressed homeowners who can’t agree to terms of a modification often end up in foreclosure.
“Modifications are better than foreclosures,” says Jack Schakett, credit-loss mitigation strategies executive at BofA.
Customers seeking more information should click here.
The program will be used with other bank and federal efforts to help struggling homeowners, such as the Home Affordable Modification Program and National Homeownership Retention Program.
Only borrowers already eligible for loan modifications will be considered for the new program. And BofA says it will contact borrowers with the offer because only a limited group of customers will be eligible. The program is intended to serve borrowers who owe at least 120 percent of their home’s value and are more than 60 days past due on mortgage payments.
Any forgiveness will depend on the borrower making on-time payments for up to five years. If the home’s value rises, the amount of principal forgiven may be reduced.
Bank of America Home Loans President Barbara Desoer says the purpose of offering principal forgiveness is to modify distressed mortgages at a better rate and to balance the interests of customers and investors.
“Many homeowners who owe considerably more on their mortgages than their homes are worth are reluctant to accept a solution that addresses only the amount of the payment without an accompanying reduction in the balance due on the loan,” Desoer said. “We believe by first addressing the significant underwater condition of some NHRP-eligible loans, the rates of customer acceptance of HAMP trial modifications and conversions to permanent modifications on those loans will be improved, and the homeowners will be more motivated to make payments.”
Desoer says the new policy “recognizes and addresses the interests of mortgage investors by ensuring that forgiveness is tied to the homeowner’s performance, reducing the probability of a future default under the modified terms, and adjusting the total amount to be forgiven in light of any gains in property values that might occur in an economic recovery.”
Here’s how the new policy works:
•BofA will contact eligible borrowers. No action is needed by customers.
•Borrowers must be underwater on their mortgage by at least 20 percent and be 60 days past due on payments.
•BofA will offer interest-free forbearance for principal loan amounts above the home’s value.
•That forbearance amount will be forgiven at a rate of 20 percent of its initial balance each year for three years.
•After three years, the loan will be reevaluated. Loans still exceeding the home’s value will continue to receive forgiveness. If the home’s value has increased during the three-year period, and the borrower is no longer underwater, then no more principal will be forgiven.
•Borrowers must make on-time payments to remain in the program.
BofA says principal reduction will be the first consideration in a loan modification. Then the bank will consider reducing interest rates if further assistance is needed.
Desoer says Charlotte-based BofA (NYSE:BAC) becomes the first major mortgage servicer to implement such a program. She says the program is needed because many underwater borrowers are reluctant to accept loan modifications unless a principal reduction is offered. But in trials, she says 30 percent of borrowers who declined a loan modification changed their mind when principal reduction was offered.
The new policy is far from a silver bullet for the housing crisis. Only 45,000 borrowers at BofA are estimated to be eligible — about 1.5 million borrowers are 60 days or more delinquent on payments, bank officials say.
Still, improving the rate of loan modifications is an important step for BofA because distressed homeowners who can’t agree to terms of a modification often end up in foreclosure.
“Modifications are better than foreclosures,” says Jack Schakett, credit-loss mitigation strategies executive at BofA.
Customers seeking more information should click here.
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