Lending Institutions Not Permitting Short Sales

A Realtor friend of mine sent me this information the other day! I truly hope they are trying to help the homeowners and are not just foreclosing on their homes! I know that Wells Fargo Bank did help many homeowners keep their homes by re negotiating the loans. Many thanks to Wells!!

Ocwen Loan Servicing announced that they are no longer permitting short sales. Their goal is to try to keep the homeowners in their homes or just take the property to foreclosure. If Ocwen is in first position and is receiving a FULL payoff, then a short sale can still be done with the second servicer (obviously). However; if Ocwen is being shorted on the first or the second, they will no longer allow the short sale process to take place at this time.

The President of National Short Sale Center is in discussions with the Ocwen Loan Servicing's Upper Management Department in an effort to allow negotiations of short sales with their company.

NAR Requests That we Send This Letter!

I constantly read emails from NAR and CAR to receive as much knowledge as I can regarding the real estate industry. Below is a letter from NAR requesting Realtors to send to their Congressperson and Senators to make the "Loan Limit Increase Key to FHA Reform Bill Permanent!"

Send a letter to the following decision maker(s): Your Congressperson Your Senators
Below is the sample letter:

Subject: Permanent Loan Limit Increase Key to FHA Reform Bill

Dear [decision maker name automatically inserted here],

As a constituent and a REALTOR, I want to stress how important it is for FHA reform legislation to be quickly enacted. These bills, passed the House and Senate in 2007, are now stalled in conference. Permanent increases in the FHA loan limits, lowered FHA downpayment requirements, and new opportunities for condominium purchases are needed to create safe and affordable mortgage options for our state's homebuyers and those wishing to refinance. These changes will also provide much needed stability to our local housing markets and economies.The new loan limits passed in the recently enacted Economic Stimulus bill will expire in less than 10 months. Dramatically reducing these limits at year's end will push our nation's fragile housing markets into turmoil once again. Realistic loan limits that permanently help ALL areas of the country are needed to bring stability to the marketplace.FHA's downpayment levels led many borrowers to opt for the exotic, risky mortgages that have been the hallmark of the foreclosure crisis. The FHA reform bills will allow FHA to modify downpayment requirements and offer flexible financing to eligible borrowers.In many areas of the country, condominiums remain the most affordable option for homeownership, but FHA owner/occupancy and documentation requirements, make it very difficult to purchase a condominium using FHA mortgage insurance. The FHA reform bills will move condominium financing programs into FHA's single-family program where they belong and ease the way for condominium purchases.We cannot wait any further for FHA reform. Pass a permanent FHA reform bill NOW to give American homebuyers and homeowners the peace of mind they so desperately need.

Sincerely,

Judge throws out ban on down-payment assistance

Federal regulators have not adequately explained their decision to reverse a policy allowing seller-funded down-payment assistance on FHA-backed loans -- or provided sufficient responses to suggestions on ways to mend, rather than end, the practice -- a federal judge has ruled.
The ruling means the U.S. Department of Housing and Urban Development will have to reopen an administrative proceeding that culminated in a rule change last October banning seller-funded down-payment assistance on loans guaranteed by the Federal Housing Administration (see Inman News story).
Claiming seller-funded down-payment assistance artificially inflates home prices and more than doubles the odds that a loan will end up in default, HUD put forward the proposed rule change last spring. A final rule banning the practice was published in the Federal Register on Oct. 1, after HUD received more than 15,000 comments on the proposal.
Three nonprofits that provide seller-funded down-payment assistance filed separate lawsuits to block implementation of the rule, saying it would have a disproportionate impact on minorities, low-income and single-parent families who rely on the down-payment-assistance programs they provide.
In a Feb. 29 order setting aside the rule change, U.S. District Court Judge Lawrence Karlton said that although HUD provided a "reasoned basis" for the rule change, it "was not honest with itself or the public that it was reversing course from its prior policy."
In putting forward the proposed rule change, Karlton said, HUD presented evidence that seller-funded down-payment assistance harms consumers by inflating home prices, and that the increased default rates on such loans leads to greater losses. HUD also noted abortive attempts at ending seller-funded down-payment assistance during the Clinton administration.
But more recently, Karlton said, HUD had "warmed" to seller-funded down-payment assistance -- a fact omitted in its arguments for a change in course.
In a 2005 letter, HUD Assistant Secretary for Housing Brian Montgomery defended seller-funded down-payment assistance against calls for a ban by the U.S. Government Accountability Office. Although Montgomery recognized problems with the practice, he said those who relied on seller-funded down-payment assistance "are representative of the population that FHA was established to serve."
At the time, Montgomery said that instead of banning the practice, FHA would rather charge higher premiums on loans that relied on seller-funded down-payment assistance.
Karlton said that "while HUD may have set forth good reasons for the rule's adoption, it did not adequately explain why it was changing its mind."
By failing to acknowledge its previous position, HUD violated the Administrative Procedures Act, which governs the process for implementing such changes, the judge said in his order.
Karlton said HUD also failed to provide an adequate response to some arguments put forward by proponents of seller-funded down payment assistance for overhauling, instead of abolishing, the practice.
Those suggestions included the same proposal put forward by Montgomery in 2005 -- that HUD implement risk-based pricing for loans involving seller-funded down-payment insurance -- and require lenders to inform appraisers of the source of down-payment assistance.
HUD maintains that it is implementing risk-based pricing, and that FHA modernization legislation now being considered by Congress will lower or eliminate down-payment requirements for some borrowers.
But Karlton said such an argument is "a non-sequitur" because HUD's intent is to introduce risk-based pricing in conjunction with a ban on seller-funded down-payment assistance, rather than in lieu of a ban, as proposed in 2005.
In ordering the Housing Department to reopen the rulemaking process, Karlton barred HUD Secretary Alphonso Jackson from participating in the proceedings because of remarks attributed to him during the public comment period.
In a June 5, 2007, article by Bloomberg News, Jackson was quoted as saying he was "very much against" seller-funded down-payment assistance. "I think it's wrong. I don't want to continue to be a partner in a program where so many people can't afford to keep up their payments."
The article also paraphrased Jackson as saying HUD intended to approve the new rule even if the agency received critical comments.
"Allowing the public to submit comments to an agency that has already made its decision is no different from prohibiting comments altogether," Karlton said.
But Karlton also said courts have found that just because officials take positions or express strong views doesn't mean they are no longer capable of being objective and fair.
Because Jackson was not involved in the original rule-making proceeding -- he had delegated that authority to Montgomery -- it might be "imprudent" to reopen the process simply to exclude him, Karlton said.
But since he had already decided to reopen the process for other reasons -- because HUD failed to provide a reasoned analysis for its departure from prior policy, and did not adequately respond to comments -- disqualifying Jackson "will likely impose little or no burden on the agency," Karlton ruled.
The ruling was made in a case brought by Nehemiah Corp. of America in the U.S. District Court for the Eastern District of California. Two similar lawsuits were filed by AmeriDream Inc. and the Penobscot Indian Nation in the U.S. District Court for Washington, D.C.
Scott Syphax, the president and chief executive officer of Nehemiah, issued a statement this week saying the company was "thrilled with the Court's decision to support low- to moderate-income families across the country" and looked forward to working with HUD in the future.

Article is by the US Housing and Urban Development
***

Good News! FHA Releases New Mortgage Limits in California

GOOD NEWS !!!!!

FHA Releases New Mortgage Limits for California Counties

FHA Max Limits Include 14 CA Counties

* FHA Press Release *

WASHINGTON - Tens of thousands of California families could be eligible
this year to purchase or refinance their homes using affordable,
government-backed mortgages, thanks to the economic growth package
signed into law by President Bush. The Economic Stimulus Act of 2008
will allow HUD's Federal Housing Administration (FHA) to temporarily
increase its loan limits and insure larger mortgages at a more
affordable price in high cost areas of the country.

"The Bush Administration is expanding the pool of eligible borrowers,
enabling more American families to qualify for safe, affordable
FHA-insured mortgage loans. These temporarily higher loan limits are a
shot in the arm for communities trying to sustain property values,
bringing much-needed liquidity to the mortgage market, while helping
many current homeowners who desperately need to refinance," said HUD
Secretary Alphonso Jackson at a forum on how to prevent foreclosure at
the Operation Hope Center in Los Angeles and a Hope Now Alliance event
in Anaheim.

Beginning tomorrow, HUD will offer temporary FHA loan limits that will
range from $271,050 to $729,750. Overall, the change in loan limits
will help provide economic stability to America 's communities and give
nearly 240,000 additional homeowners and homebuyers a safer, more
affordable mortgage alternative. The maximum amount of $729,750 will
only be applicable to extremely high-cost metropolitan areas such as:
Los Angeles County , San Francisco County , Orange County , and Santa
Barbara County . Previously, FHA's loan limits in these very high-cost
areas were capped at $362,790.

The Economic Stimulus Act of 2008 permits FHA to insure loans on amounts
up to 125 percent of the area median house price, when that amount is
between the national minimum ($271,050) and maximum ($729,750). The new
minimum and maximum loan limits are based on 65 percent and 175 percent
of the conforming loan limits for Government-Sponsored Enterprises in
2008, which is $417,000. The FHA used a combination of existing
government data sets and available commercial information to determine
the median sales price for each area. The change in loan limits are
applicable to all FHA-insured mortgage loans endorsed after HUD
publishes the increased loan limits tomorrow, and it lasts until
December 31, 2008 .

By increasing loan limits nationwide, FHA will provide much needed
liquidity and stability to housing markets across the country. Already,
as conventional sources of mortgage credit have been contracting, FHA
has been filling the void. From September to December 2007, FHA
facilitated more than $38 billion of much-needed mortgage activity in
the housing market, more than $15 billion of which was through
FHASecure, FHA's refinancing product. By focusing on 30-year fixed rate
mortgages, FHA helps homeowners avoid and escape the risks associated
exotic subprime mortgage products, which have resulted in rising default
and foreclosure rates.

"This is not an easy crisis to address, and there is no silver-bullet,
but I know that we can help hundreds of thousands of people keep their
homes, and we can calm the waters," said Jackson .

In January 2009, FHA's maximum loan limit will return to $362,790,
unless the U.S. Congress approves bipartisan legislation to permanently
increase loan limits as part of the FHA Modernization bill, which is
still awaiting final approval on Capitol Hill.

"In January 2009 the loan limits will return to their previous setting,"
Jackson said. "That is why we need to permanently raise the loan limits
to an acceptable level that more accurately reflect housing prices
nationwide. We also need to make the minimum down payment more flexible
and create a fairer insurance premium structure. This will allow more
families to use FHA."

FHA loan limits are based on the county in which the property is
located. However, for properties located in metropolitan or
micropolitan statistical areas, the limit is set at that of the county
with the highest limit within the metropolitan or micropolitan area.

The new temporary FHA loan limits for California are attached below.
The full text of the Secretary's remarks can be found on the HUD
website.

HUD is the nation's housing agency committed to increasing
homeownership, particularly among minorities; creating affordable
housing opportunities for low-income Americans; and supporting the
homeless, elderly, people with disabilities and people living with AIDS.
The Department also promotes economic and community development, and
enforces the nation's fair housing laws. More information about HUD and
its programs is available on the Internet at www.hud.gov

California County Limits

Obs prop_addr_st county_nm med_price FHA_1unit
185 CA Alameda County 995000 729750 - MAX
186 CA Alpine County 438000 547500
187 CA Amador County 355000 443750
188 CA Butte County 320000 400000
189 CA Calaveras County 370000 462500
190 CA Colusa County 318000 397500
191 CA Contra Costa County 995000 729750 - MAX
192 CA Del Norte County 249000 311250
193 CA El Dorado County 464000 580000
194 CA Fresno County 305000 381250
195 CA Glenn County 230000 287500
196 CA Humboldt County 315000 393750
197 CA Imperial County 260000 325000
198 CA Inyo County 350000 437500
199 CA Kern County 295000 368750
200 CA Kings County 260000 325000
201 CA Lake County 321000 401250
202 CA Lassen County 200000 271050
203 CA Los Angeles County 710000 729750 - MAX
204 CA Madera County 340000 425000
205 CA Marin County 995000 729750 - MAX
206 CA Mariposa County 330000 412500
207 CA Mendocino County 410000 512500
208 CA Merced County 378000 472500
209 CA Modoc County 125000 271050
210 CA Mono County 370000 462500
211 CA Monterey County 599000 729750 - MAX
212 CA Napa County 615000 729750 - MAX
213 CA Nevada County 450000 562500
214 CA Orange County 710000 729750 - MAX
215 CA Placer County 464000 580000
216 CA Plumas County 328000 410000
217 CA Riverside County 400000 500000
218 CA Sacramento County 464000 580000
219 CA San Benito County 790000 729750 - MAX
220 CA San Bernardino County 400000 500000
221 CA San Diego County 558000 697500
222 CA San Francisco County 995000 729750 - MAX
223 CA San Joaquin County 391000 488750
224 CA San Luis Obispo County 550000 687500
225 CA San Mateo County 995000 729750 - MAX
226 CA Santa Barbara County 615000 729750 - MAX
227 CA Santa Clara County 790000 729750 - MAX
228 CA Santa Cruz County 719000 729750 - MAX
229 CA Shasta County 339000 423750
230 CA Sierra County 228000 285000
231 CA Siskiyou County 235000 293750
232 CA Solano County 446000 557500
233 CA Sonoma County 530000 662500
234 CA Stanislaus County 339000 423750
235 CA Sutter County 340000 425000
236 CA Tehama County 250000 312500
237 CA Trinity County 200000 271050
238 CA Tulare County 260000 325000
239 CA Tuolumne County 350000 437500
240 CA Ventura County 599000 729750 - MAX
241 CA Yolo County 464000 580000
242 CA Yuba County 340000 425000

NAR's Economist's Commentary!

Refueling the Housing Bubble?
By NAR Chief Economist Lawrence Yun

The Federal Reserve has been aggressively cutting rates recently and the question is being raised about parallels to the past. Back in 2001, in the aftermath of the internet stock bubble collapse and the September 11 terrorist attacks, Alan Greenspan — then the Fed chairman — made deep cuts in interest rates in order to stave off a possible economic recession. Many also blame Mr. Greenspan for having fueled the housing market bubble and subsequent collapse by keeping the rates too low for too long.

Now in early 2008, with the economy possibly heading into a recession — as evidenced by the GDP growth rate slowing from 4.1% in third quarter to 0.6% in the fourth quarter — the current Fed Chair, Ben Bernanke, has been following a very similar step of sharply cutting fed funds rates in order to revive economic growth — partly by making home buying financially enticing. Though there is never a direct correction between the Fed funds rate and mortgage rates, which are outside of the Fed's control and determined by the global bond market, the current 30-year mortgage rates have come down to essentially 45-year low levels. Aside from a few months in 2003, mortgage rates have never been this low since the early 1960s. A drop in the average mortgage rate from nearly 7% in mid-2005 to the current 5.7% would reduce monthly mortgage payments from $1330 to $1160 on a $200,000 mortgage. The average savings would be $340 per month or $4,000 per year on a $400,000 mortgage.

Therefore, could the Fed be simply refueling the bubble by dangling financial incentives to buy a home? Well, let's replay the key factors related to the recent bubble-collapse and see whether the same behavioral patterns will reemerge. Keep in mind that there are significant local market variations, but the markets that had the huge swings followed the below pattern:

The Fed started cutting rates from 2001 — with the Fed funds rate eventually reaching 1% by mid-2003.


The mortgage rate fell to 5.5% by the summer of 2003 from 8% in 2000. ARMS rates fell from 7% to 3.5% over the same period.


Housing demand rose with existing and new home sales hitting successive high marks in 2003, 2004, and 2005. Inventory fell as a result.


Home prices accelerated. For example, in the D.C. region home prices more than doubled from $204,000 to $426,000 from 2001 to 2005. Homeowners' net worth leapt by over $200,000 as a result — a figure many would considered good lifetime savings.


Given the general weakness in the stock market and relative "easy" wealth gains for real estate owners — there was an increasing view of homeownership and real estate as a financial play rather than in terms of family and housing needs considerations.


Housing demand ran exceptionally high, but the demand could only be realized if people could get the financing.


Global capital providers were chasing after high yields and were eager to provide the financing because…


Ratings agencies gave their blessing on subprime products, giving the impression that these were 'safe' alternatives.


Moody's, Standard & Poor's, and other ratings agency raked in revenue by giving out top Triple-A ratings (an inherent conflict of interest exists when ratings agencies get their revenue from mortgage underwriters/securitizers… rather like a professor who gives out a lot of "A" grades will draw more tuition paying students to his class).


With funding plentiful, subprime and no documentation loans proliferated — if you had a heartbeat, you could get a loan.


Housing demand was further pushed higher as herds of house-flippers entered the market, and home prices accelerated in those markets. Prices grew by leaps and bounds in markets of around 70% in short two years — places like Las Vegas, Miami, and Phoenix, and Sacramento.


Inventories were pushed down to exceptionally low levels and homebuilders could not keep up with demand.


From late 2004, the Fed began to tighten and mortgage rates climb in 2005.


Housing demand naturally fell off.


Inventory quickly built — from a combination of lower demand, builders continuing to build at a high pace, and some speculators/flippers realizing that the period of easy price gains was coming to an end.


Rising inventory held back price gains.


Price stagnation no longer permitted mortgage refinancing. Flippers/speculators started carrying burdensome mortgage costs — some begin to simply walk away — pushing inventory higher.


Non-flippers — primary homeowners, who took out subprime loans, also faced the same price stagnation, but also the resetting higher interest rates. Refinancing is not possible and some have been forced to foreclose


More and more flippers/speculators and homeowners are unable to carry the high resetting interest rates and simply walk away. Lenders begin to write-down loan losses.


After the fact and very late, the ratings agencies stated that subprime loans are no longer Triple-A quality.


Global capital providers stopped funding subprime loans and the subprime market came to a halt.


Global capital providers, having been burned, also stop funding any U.S. mortgages other than those with Fannie and Freddie backing. The jumbo loan market, therefore, struggles.


From mid-2007, a lack of market liquidity and economic slowdown forces the Fed to cut rates.


Conforming mortgage rates again fall to historic lows, but not jumbo loan rates.


The Fed has been and is further ready to make deeper cuts.
Going back to our earlier question: is the current action by the Fed simply trying to replay the same volatile game? The answer is an unambiguous NO. The same game is played out because the global capital providers will not be taken for fools again. After being burned, German mutual funds or the Chinese government or the Florida's teacher pension fund will no longer buy toxic subprime loans. Without the loans, homebuyers simply cannot enter the marketplace independent of their desires. We are back to the careful underwriting standards of verifying people's income, requiring escrow accounts, and back to thoroughly checking borrower's ability to repay the loan.

However, the current low interest rate policies of the Fed are a big help to housing because low rates can begin to furnish genuine potential homebuyers with the financial capacity to think seriously about becoming a homeowner. Furthermore, the rate cut is lessening the degree of forthcoming ARM resets, thereby lessening the burden the current subprime loan borrower faces. So the current policy of Ben Bernanke will help stabilize the housing market.

The Federal Reserve, however, should be mindful to not lower the fed funds rate too greatly. Inflation is expected to head lower in 2008 but too much money can fuel inflationary pressures. If that happens, 30-year mortgage rates will RISE, and therefore, choke off any housing recovery. A careful balance must be taken regarding how low to bring down the fed funds rate.

Though some in the blogosphere have figured Alan Greenspan as one of the key persons to blame for the current housing mess, I do not blame Mr. Greenspan. I believe there is plenty of blame to go around due to other factors. Global capital providers misunderstood and were simply not careful about purchasing securities composed on little income documentation and of risky-borrowers. Mortgage originators just originated loans to anyone including to suspicious borrowers because they had no skin in the game (see the recent academic article on this topic by a group of professors from the University of Chicago). There were also many books about how to endlessly profit from real estate. Consumers — particularly the flippers/speculators — also need to bear some of the blame.

But the biggest blame in my view goes to Moody's and Standard & Poor's — the rating agencies. If they had properly assessed the risk as is their job, then global capital would have never reached subprime homebuyers and flippers. The housing boom would have stopped dead in its tracks. We do not yet know how much of the ratings firms' assessment were clouded by their financial interest in giving out easy Triple-A grades. Many workers at Moody's and Standard & Poor's took home hefty bonus checks when revenue skyrocketed from providing high ratings.

It is also fine for people to point the finger at me. In a fast changing market conditions, I too have been off on my forecast. I knew that the boom was clearly unsustainable and I made the forecast in early 2007 that home prices were likely to experience a price decline on a national level for the first time since the Great Depression. The national median home price indeed fell by 1.4%. I believe I downgraded my forecast for ten or so straight months in 2007 as it was strongly pointed out to me. At the same time, the Blue Chip consensus forecast, comprised of about top 50 private forecasters, including forecasts by Merrill Lynch, Goldman Sachs, UCLA, and the like — had also downgraded the housing forecast by more than 20 straight months. Forecasting is never perfect. Forecasts are bound to be off but the forecaster's job is to make the best prognosis given the available information at the time. The readers should always view any forecast with caveat emptor.

But back to the original question: Will we experience a re-emergence of a housing boom from the current easy money policy by the Fed? The answer is no because as Abraham Lincoln said — fool me once, shame on you. Fool me twice, shame on me. It will be impossible to part global capital providers' money with another foolish investment.

Economic Stimulus

President Approves Higher Loan Limits: On Wednesday (2/13), President Bush signed the economic stimulus package that includes a temporary increase in the conforming loan limits for mortgages backed by the GSEs (Fannie Mae and Freddie Mac) and the FHA. The new loan limits could rise to $729,750 in high-cost regions.

According to NAR, more than 85,000 REALTORS® contacted their senators urging them to support the increased loan limits and to pass the stimulus package.

REALTOR® Impact: Higher loan limits will have a direct positive impact on REALTORS®. The policy change will allow more buyers (both first-time and move-up buyers) to access loans with lower interest rates. Currently, most home buyers in high-cost regions (such as the SF Bay Area) must finance their purchases with non-conforming "jumbo" loans. The interest rates on these loans can be up to one percentage point higher than those that fall within the current $417,000 limit. Higher rates mean higher payments which could keep potential buyers out of the market. Lower raters will make access to capital easier and provide the incentive for buyers to get off the fence and into real estate.

Next Steps: We may see new loan products as soon as late April or early May. According to sources at C.A.R., the Secretary of the U.S. Department of Housing and Urban Development will have up to 30 days to finalize the actual amount of the regional loan limits. Once the limits are set, Fannie Mae and Freddie Mac will need to update their procedures to reflect the changes. Shifting from a national loan limit to region limits is a major change for both Fannie Mae and Freddie Mac. Regardless, our sources tell us that both GSEs want to implement the new limits as soon as possible.

CAR is not sure when the FHA will respond. However, they may be able to implement the new limits quicker than the GSEs.

This report is compliments of Bay East's Governent Affairs Director David Stark!