For the week ending August 7, we didn’t stray from the post-tax credit trends in the Twin Cities housing market. Pending sales remained entrenched in a holding pattern around 600 per week, continually underperforming last year’s activity. The 659 purchase agreements signed were 36.5 percent below 2009 figures.

Weak sales means rising inventory. There are 27,664 homes available for sale, up 7.4 percent from a year ago. In August, there will be 8.64 homes available per buyer, up dramatically from the mark of 5.28 seen a year ago.

For now, Days on Market continues to drop slightly from last year, down 6.8 percent from a year ago to 127, but Percent of Original List Price Received at Sale for July 2010 declined from a year ago for the first time in several years, an indication that home prices will remain soft in the months ahead.

By Les Christie, staff writerAugust 12, 2010: 4:39 AM ET

NEW YORK (CNNMoney.com) — The latest foreclosure numbers carried a mixed message: They’re up 3.6% from the month before but down 9.7% from 12 months earlier.

In July there were more than 325,000 foreclosure filings — including notices of default, auctions notices and bank repossessions. That is the 17th month in a row total filings exceeded 300,000, said RealtyTrac’s CEO, James Saccacio.

“Declines in new default notices, which were down on a year-over-year basis for the sixth straight month in July,” he said, “have been offset by near-record levels of bank repossessions, which increased on a year-over-year basis for the eighth straight month.”

A near record number of people lost their homes to mortgage payment problems in July. Lender repossessions amounted to 92,858 homes, the second highest monthly total ever behind the 93,777 recorded this May.

Repossession is the final stage in the foreclosure process. People can stay in thier homes until the point that the bank takes posession of the home or sells it at auction.

By Hibah Yousuf, staff reporterAugust 12, 2010: 2:18 PM ET

NEW YORK (CNNMoney.com) — Mortgage rates continued to decline this week, plunging to the lowest level in decades, according to surveys from Freddie Mac and Bankrate.

Freddie Mac’s weekly report said the 30-year fixed rate slipped to 4.44% for the week ended Thursday, the lowest since the government-backed lender began tracking the rate in 1971. Last week’s rates stood at 4.49%, and a year ago it was at 5.29%.

The 15-year fixed rate fell to 3.92% this week, the lowest since Freddie Mac began tracking it 1991, down from 3.95% last week and from 4.68% a year ago.

Adjustable-rate mortgages also declined, with the 5-year rate falling to 3.56% this week, the lowest since 2005 when the lender began tracking it.

Mortgage tracker Bankrate.com, which surveys large lenders across the country, said the average 30-year fixed loan sank to a record low for the fourth consecutive week, falling to 4.57% from 4.66% the previous week.

The 15-year fixed rate, which is a popular option for refinancing, also fell to the lowest level in the history of Bankrate’s 25-year old survey, dipping to 4.06%, from 4.11% the week before.

While the 1-year adjustable-rate mortgage held steady at 4.8% for a fourth week, the 5-year adjustable rate mortgage dropped to a record low of 3.92% from 3.95% the previous week.

“Low rates are helping to heal many battered local housing markets by increasing home-purchase activity, said Frank Nothaft, chief economist at Freddie Mac.

Mortgage rate applications inched up a modest 0.6% during the week, according to the Mortgage Bankers Association. Applications for purchase rose 0.3% while refinance applications increased 0.6%.

Paying off an underwater mortgage and buying a better home could be the best tactic in this troubled market.

“If you are trading up, what better time than when interest rates are at record lows and the cost of the trade-up is much less than it used to be?” says Christopher J. Mayer, a Columbia Business School economist.

With 15-year fixed-rate mortgages at about 4.5 percent, it also makes sense to pay off the mortgage and keep the house. “At this point,” says Jay Brinkmann, chief economist of the Mortgage Bankers Association in Washington, D.C., “if they don’t have anything else that is bringing a tremendous return, then they are buying themselves an annuity by paying their house off sooner than they needed to.”

Source: The Wall Street Journal, M.P. McQueen (07/24/2010)

During the recession in 2001, a strong home-sale market was instrumental in pulling the economy back on track. The opposite may be the case now. The economy, particularly employment, needs to improve before the housing market stabilizes.

Low interest rates are helping the home-sale market today, but the housing market is far from stalwart. Unemployment is high; mortgage qualification is difficult; and most buyers can’t afford to buy a new one without selling their existing home first, creating a logjam in the repeat homebuyer segment of the market.

Interim or bridge financing that buyers used routinely in the past to buy a new home before selling their current home is virtually nonexistent in today’s market. An interim loan is a loan secured on your current home to generate cash for a downpayment on a new home.

Homeowners who have a home equity line of credit (HELOC) secured against their property can tap unused funds to convert equity to cash in order to buy a new home before selling first.

HOUSE HUNTING TIP: Seller financing could be the answer for some homebuyers. One possibility would be to ask the sellers of the home you want to buy to carry financing until you sell your home.

If the sellers have no mortgage secured against the property — i.e., they own it free and clear — they might be willing to carry a first mortgage. Compared to other investment options, 5 percent or so from a buyer with good credit and a decent downpayment could be attractive if the seller doesn’t have an immediate need for the proceeds from the sale.

As with all terms of a purchase agreement, the terms of seller financing are negotiable — everything from the interest rate, when the loan is due, how and when payments are made, the amount of the late fee, etc.

Interest on the mortgage can accrue and be due when the loan is paid off. Or payments can be amortized and paid monthly. Particularly with a first mortgage, sellers will probably want to receive periodic payments. However, it lowers the buyers’ carrying costs while they own two homes if the seller will defer payments until the note is paid off.

A more common scenario than a seller-carry first mortgage would be to find sellers of a home you’d like to buy who have enough equity to carry a second mortgage secured either against your current home or on the home you are buying from them.

This wouldn’t work if the sellers have already committed their proceeds from the sale, like to the purchase of another home.

If the sellers carry a second mortgage on your home, it should not require approval of your first mortgage lender. However, you would need to be able to qualify for a first mortgage on the new home. In order to be approved for that loan, your overall debt-to-income ratio will be scrutinized by the lender’s underwriters.

The underwriters will factor in the cost of the seller-carry financing into your overall debt. Most lenders will also want the term or due date of the seller’s loan to be not less than five years from closing. Check with your mortgage broker or lender before making an offer that will include seller financing to find out what the first lender on the new home will require.

The sellers will want their loan paid off when your current home sells. The first mortgage lender might allow a seller-carry second mortgage with a due date in five years or when your home sells, whichever occurs first.

THE CLOSING: The lender wants to make sure the buyers aren’t faced with a large balloon payment due months after closing.

Dian Hymer, a real estate broker with more than 30 years’ experience, is a nationally syndicated real estate columnist and author of “House Hunting: The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide.”

Sales of new, single-family houses were the lowest on record for the month of June, according to figures in a report by the U.S. Census Bureau and the Department of Housing and Urban Development.

Sales hit a seasonally adjusted annual rate of 330,000, the lowest rate for that month since the Census Bureau began keeping such records in January 1963. The previous June low was in 1982, when the seasonally adjusted sales rate was 372,000.

The June sales rate was 16.7 percent lower than in June 2009, which had an estimated annual rate of 396,000 sales.

The rate did represent a 23.6 percent month-to-month rise over May sales, which had hit a record low. That record low was downwardly revised this month to an annual rate of 267,000, from the 300,000 previously estimated.

Bob Jones, chairman of the National Association of Home Builders (NAHB), called the month-to-month rise “an encouraging sign” following May’s slowdown in sales after the federal homebuyer tax credits’ expiration.

Under the program, buyers had until April 30 to have a home under contract. The bureau counts new-home sales when a contract is signed — this differs from industry methodology for existing-home sales, which the National Association of Realtors counts when the transaction is closed.

“It’s worth noting that some of the new-home sales in June were due to move-up buyers who were able to sell their previous home to a tax-credit-eligible buyer while that program was active,” said David Crowe, chief economist of the National Association of Home Builders (NAHB), in a statement.

“Also, while sales activity is still far from robust, it has picked up some momentum. We anticipate that this momentum will continue along with a gradually improving economy, although other factors such as a critical lack of production financing remain a drag on housing’s recovery.”

New homes sold for a median price of $213,400 and an average price of $242,900 in June, compared to $200,900 and $263,400, respectively, in May.

New houses for sale at the end of June totaled an estimated seasonally adjusted 210,000 — a supply of 7.6 months at the current sales pace. That raw inventory figure is a 25 percent decrease from June 2009; supply fell 10.6 percent.

Regionally, only the Northeast saw a year-over-year increase in new-home sales, up 17.1 percent. The region made up 12.4 percent of total new-home sales in June.

The West saw the sharpest year-over-year decline, at -45.7 percent. The region made up 17.3 percent of sales in June. Next came the Midwest with a 20.3 percent drop in sales. The region accounted for 14.2 percent of sales last month.

The South saw the smallest drop in sales, down 6.1 percent. The region accounted for 56.1 percent of sales in June.

Month-to-month, new home sales rose in every region except the West. They rose 46.4 percent in the Northeast, 33.1 percent in the South and 20.5 percent in the Midwest. In the West, sales fell 6.6 percent.

In a separate report, the California Building Industry Association said June housing starts in the state had posted the highest monthly total since December 2008.

State and local governments issued 4,238 total housing units in June, up 19 percent year-over-year and up 34 percent month-to-month.

Much of those gains were due to permits for multifamily units, which totaled 1,610 — a 140 percent jump from a year ago and a 35 percent increase from May, the report said. There were 2,628 permits issued for single-family homes, a 9 percent decrease from June 2009, and a 33 percent increase from May.

“… (W)e’re still hovering around the record-low production levels of the past two years, and the industry is still facing an uphill battle in the wake of a stabilizing housing market and high unemployment,” said Liz Snow, the president and CEO of the CBIA, in a statement.

“We’re still expecting a modest improvement over last year and hope that the state tax credits for homebuyers will continue to help chip away at the inventory of unsold homes so that job-generating new-home construction can get back to healthy levels in the near future.”

Friday, July 23rd, 2010, 1:25 pm

When President Barack Obama signed the Dodd-Frank Act this week to reform the financial markets, the Home Valuation Code of Conduct (HVCC) was officially set for elimination in 90 days.

The Federal Housing Finance Agency (FHFA) implemented HVCC in May 2009 in an attempt to improve the independence of appraisers by prohibiting lenders and third parties from influencing appraisals. It’s a controversial regulation, leading to an increase in demand for appraisal management companies (AMCs) and complaints from independent appraisers who claim they’re being cut out of the market.

Before the Congress passed the bill, a congressional conference took place to reconcile versions from the House and Senate. Lawmakers pu  a new set of “appraisal independence standards” into the bill to replace of the HVCC.

The “appraisal independence standards” will be written over the next 60 days. The newly enacted bill, unlike HVCC, allows Fannie Mae or Freddie Mac to accept any appraisal report completed by an appraiser selected or paid by a mortgage loan originator.

The reform also stipulates that the new standards will include a requirement that lenders and their agents pay appraisers at market rates.

The new standards will still subject loan originators to any state or federal laws that prohibit it from making payments, threats or promises to an appraiser to influence the work. But nothing in the standards will prohibit a person with an interest in the transaction from asking the appraiser to consider other information, provide further detail or correct errors in the appraisal.

A spokesperson at OK Appraisals, a company based in California, said he’s still waiting to see the new rules.

“Good riddance to HVCC. We now have to see what the Fed will write … as to the concrete rules on appraiser independence. Hopefully nobody will be excluded from ordering an appraisal,” the spokesperson said.

According to a client alert from K&L Gates, an international law firm that represents capital market players, the end of HVCC will not mean the end for AMCs.

“While the HVCC may be fading into the sunset, don’t expect the same fate for AMCs, AVMs, and BPOs,” according to K&L Gates.

Write to Jon Prior.

Fannie Mae says appraisers must have local knowledge

BY INMAN NEWS, WEDNESDAY, JULY 7, 2010.

Inman News

Fannie Mae has put lenders on official notice that they can only use appraisers who are knowledgeable about the area in which they are being asked to value property, and who have the ability to access records on recent sales in those markets.

In a June 30 notice updating several policies related to appraisals, Fannie Mae also fleshed out previous guidance to lenders on the selection and use of comparable sales, saying appraisers must consider a property’s condition when choosing to use foreclosure sales or short sales as comps.

Fannie Mae is also barring lenders from making unilateral changes to appraisal reports, including the appraised value, saying only the appraiser who completed the original report is authorized to change it.

If lenders can’t work out their difference with the appraiser, they can order a formal review or a new appraisal, Fannie Mae said, but must stick with the new appraisal’s findings.

The mortgage securitization giant also said that new rules for appraisals adopted last year by Fannie Mae and Freddie Mac don’t bar Realtors or other authorized third parties from requesting that appraisers correct factual errors in their reports, or provide additional information or explanations about the basis for their valuations.

Some lenders cited the new rules as justification for policies that prohibit communications with appraisers, Fannie Mae said.

Since the new rules for appraisals were adopted in May 2009, Realtors have complained that lenders have been relying more on appraisal management companies, and that appraisals are more likely to fall short of the contracted sales price.

The Home Valuation Code of Conduct, a product of New York Attorney General Andrew Cuomo’s investigation of the mortgage securitization process, was intended to protect appraisers from coercion by lenders.

Although it does not require lenders to use appraisal management companies, commonly referred to as AMCs, many lenders choose to employ AMCs to ensure they are compliance with the code.

Realtors and independent appraisers claim that AMCs often employ appraisers with little experience in the markets in which they are asked to provide valuations. Builders have also complained that the inappropriate use of distressed properties as comps have dented new-home prices.

Federal regulators that oversee Fannie Mae and Freddie Mac have defended the code of conduct, saying it’s improved the quality of appraisals.

In ruling that Fannie and Freddie would not be required to fund an independent institute to investigate complaints about attempted violations of the rules, the Federal Housing Finance Agency noted that the code will no longer be in effect after Nov. 1.

Language in the financial reform bill now under consideration by lawmakers would require a new Consumer Financial Protection Bureau to draft new interim rules for protecting appraiser independence within 90 days of the bill’s passage that would supersede the Home Valuation Code of Conduct.

In the meantime, Fannie Mae says post-purchase reviews of mortgage loan files have identified issues with appraisals, leading it to add new policy requirements and clarifications to a number of appraisal sections of the selling guide it publishes for lenders.

Appraiser selection

The new guidance on appraiser selection begins on page 476 of the selling guide, and is effective immediately. Lenders must use appraisers who “have the requisite knowledge required to perform a professional quality appraisal for the specific geographic location and particular property type,” Fannie Mae said, as well as access to “necessary and appropriate data sources for the area in which the appraisal assignment is located.”

Although the Uniform Standards of Professional Appraisal Practice (USPAP) spell out procedures that allow appraisers who haven’t demonstrated their knowledge and experience to accept and complete assignments, Fannie Mae said it will not allow that flexibility.

“In addition to knowledge, experience, access to the appropriate data sources, and geographical competence, the quality of appraisal work is a key criterion that the lender should use in selecting an appraiser,” Fannie Mae said. The requirement for an appraiser to produce a high-quality work product “must always outweigh fee or turnaround time considerations.”

The Federal Housing Administration adopted new appraisal guidelines on Feb. 15 that include “geographic competency” requirements.

Choosing comps

Guidance to lenders on the selection and use of comparable sales begins on page 532 of the selling guide, and is effective immediately.

Appraisers will be required to perform a neighborhood analysis in order to identify the area that is subject to the same influences as the property being appraised, based on the actions of typical buyers in the market area.

If an appraiser believes a foreclosure sale or a short sale within that area is an appropriate comp, the appraiser cannot assume it is equal to the subject property, Fannie Mae said. Appraisers are required to identify and consider any differences from the subject property, such as the condition of the home and whether any stigma has been associated with it.

When performing valuations of newly built homes, appraisers may need to rely solely on the builder of the property for comparable sales data, Fannie Mae said.

If comparable sales data is not available from typical sources, such as public records or multiple listing services, appraisers are permitted to verify recent sales of new homes by viewing a copy of the HUD-1 settlement statement from the builder’s file.

Fannie Mae will continue to require at least three comparable sales, although more may be submitted. While comps from the subject property’s neighborhood are preferred, comps located in competing neighborhoods are allowed, as “these may simply be the best comparables available and the most appropriate for the appraiser’s analysis,” Fannie Mae said.

When that situation arises, appraisers must indicate the comparables are from a competing neighborhood, and address any differences that exist, instead of simply expanding the subject property’s neighborhood boundaries to encompass the comps selected.

Lender changes

Guidance on lender changes to appraised value and guidance on addressing appraisal deficiencies begins on page 543 of the selling guide, and applies to all loan applications dated on or after Sept. 1, 2010.

If lenders have issues with any findings in an appraisal report, including the appraised value, they must attempt to resolve their concerns with the appraiser who originally prepared the report, Fannie Mae said.

“It is not acceptable for the lender to exercise blanket discretion by arbitrarily changing the opinion of market value from a report for use in the lending process,” Fannie Mae said.

Only the appraiser who originally completed the report is authorized to make changes. If lenders can’t resolve their concerns, they may order another appraisal report, but must rely solely on that report’s estimate of market value.

Lenders cannot “simply average the two opinions of market value in order to arrive at a final value conclusion,” Fannie Mae warned.

In another miscellaneous change to policies governing appraisal forms and report exhibits beginning on page 492 of the selling guide, Fannie Mae stated that for loan applications filed on or after Sept. 1, 2010, it would require interior photographs of specific rooms and areas whenever an interior inspection is performed.

Housing starts fell 10 percent in May to an annual rate of 593,000, according to the Commerce Department figures released on Wednesday.

Single-family starts fell 17 percent, the largest decline since January 1991 to a 468,000 pace. Building permits, seen as a sign of future construction, were down 9.9 percent, hitting a one-year low. Only multifamily was up, rising 33 percent.

Economists say the construction market is heavily dependent on employment and the foreclosure market, and there is a dearth of good news in both areas.

Michael Moran, chief economist at Daiwa Capital Markets America Inc. in New York, said before the report. “I see the housing market staying neutral for a time, moving sideways rather than being a source of growth.”

Source: Bloomberg News, Courtney Schlisserman (06/16/2010)

For the first time in more than a month, the number of mortgage applications to purchase homes rose last week.

On an adjusted basis, the Mortgage Bankers Association purchase index increased 7.3 percent compared to the previous week. On an unadjusted basis it was up 17.4 percent. Compared to the same week last year, applications declined 31.3 percent.

Michael Fratantoni, MBA’s vice president of research and economics, was reluctant to declare this a trend. “While it is clear that purchase applications in May dropped sharply as a result of the tax credit induced increase in applications in April, it is unclear whether we are seeing the beginnings of a rebound now,” he said.

Mortgage rates were up slightly last week:

• 30-year fixed-rate mortgages increased to 4.82 percent from 4.81 percent.
• 15-year fixed-rate mortgages decreased to 4.23 percent from 4.26 percent.
• 1-year ARMs increased to 7.07 percent from 6.94 percent.

Source: Mortgage Bankers Association 06/16/2010)