Instability in Financial Markets Overseas Lowers Mortgage Rates Here

Freddie Mac released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 4.78 percent with an average 0.7 point for the week ending May 27, 2010, down from last week when it averaged 4.84 percent. Last year at this time, the 30-year FRM averaged 4.91 percent. The 30-year FRM has not been lower since the week ending December 3, 2009, when it averaged 4.71 percent.

The 15-year FRM this week averaged 4.21 percent with an average 0.7 point , down from last week when it averaged 4.24 percent. A year ago at this time, the 15-year FRM averaged 4.53 percent. The 15-year FRM has not been lower since Freddie Mac started tracking the 15-year FRM in August of 1991.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.97 percent this week, with an average 0.7 point, up from last week when it averaged 3.91 percent. A year ago, the 5-year ARM averaged 4.82 percent.
The 1-year Treasury-indexed ARM averaged 3.95 percent this week with an average 0.6 point, down from last week when it averaged 4.00 percent. At this time last year, the 1-year ARM averaged 4.69 percent. The 1-year ARM has not been lower since the week ending May 27, 2004 when it averaged 3.87 percent.

(Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)

“These low rates will help to elevate home-buyer affordability and soften the effects of the sunset of the home-buyer tax credit,” said Frank Nothaft, Freddie Mac vice president and chief economist. “The credit substantially propelled home sales, as reflected in the strength of the April existing and new home sales, which were up 7.6 percent and 14.8 percent, respectively.

“The latest information from Freddie Mac’s repeat-transactions home-price indexes also show some encouraging signs, with national metrics either slowing their descent or showing a modest rise, suggesting that the sharp downturn in national indexes since 2006 may be nearing an end. The S&P/Case-Shiller Index ® for the United States was up 2.0 percent year-over-year, and while the FHFA Purchase-Only Index and Freddie Mac's Conventional Mortgage Purchase-Only indexes showed declines of 3.1 percent and 1.1 percent, respectively, from first quarter of 2009 to first quarter of 2010, the FHFA's monthly U.S. index showed a pickup in values from February to March.”

Source: Freddie Mac

Foreclosure Cancellations Continue to Rise

Foreclosure cancellations have risen more than 32 percent since the beginning of 2009, according to ForeclosureRadar. The company also reported the number of properties sold to third parties continues to rise.

“The steady rise in cancellations leads us to believe that loan modifications and short sales are gaining traction,” Sean O’Toole, founder and CEO of ForeclosureRadar.com said. “I’d caution, however, that cancellations also occur due to filing errors and extended postponements, which require the Notice of Trustee Sale to be re-filed. In fact, 14.6 percent of new Notice of Trustee filings in April were on previously cancelled foreclosures.”

Source: ForeclosureRadar

California Association of Realtors Issues Consumer Alert on Refinanced Mortgages

The California Association of Realtor has issued a consumer alert warning borrowers of the liability associated with refinanced mortgages. To help protect consumers, C.A.R. is sponsoring Senate Bill 1178 by State Sen. Ellen Corbett (D-San Leandro) to extend anti-deficiency protections to homeowners who have refinanced “purchase money” loans and now are facing foreclosure. The Senate may vote on the bill as early as next week.

Currently, if a homeowner defaults on a mortgage used to purchase their home, the homeowner’s liability on the mortgage is limited to the property itself. While this law has helped protect borrowers since its inception in the 1930s, it does not extend the protection for purchase money mortgages to loans that refinance the original purchase debt—even in cases where the loan was refinanced to achieve a lower interest rate.

Source: California Association of Realtors

California First-Time Home Buyer Tax Credit Update

The California Franchise Tax Board (FTB) recently released an update on the California home buyers’ tax credit alerting borrowers to fax delays it is experiencing. Due to the high volume of faxes, borrowers may experience delays or difficulties in connecting to the fax number during the FTB’s normal business hours. It may take several minutes or possibly up to an hour to connect and transmit the faxed application. All applications for the California home buyers tax credit must be submitted via fax.

Source: California Franchise Tax Board

Home Prices Projected to Begin Rebound in 2011

U.S. home prices will begin a gradual recovery by next year, according to a survey of 92 economists and other housing analysts by MacroMarkets LLC.

Separately, the U.S. Census Bureau reported that single-family housing starts in April surged to a seasonally adjusted annual rate of 593,000, up 10.2% from March. Ivy Zelman, chief executive of research firm Zelman & Associates, said builders stepped up production ahead of the April 30 deadline for sales qualifying for a federal tax credit, but since then have cut back.

The analysts surveyed by MacroMarkets on average expect home prices, as measured by the S&P/Case-Shiller national index, to rise about 12% in the five years ending Dec. 31, 2014. As of Dec. 31, that index was down about 28% from its peak level in mid-2006.

Some of the forecasters surveyed by MacroMarkets were far from the average. Joseph LaVorgna, an economist at Deutsche Bank, sees home prices rising 37% by the end of 2014. Both Anthony Sanders, a professor of real-estate finance at George Mason University, and Gary Shilling, president of A. Gary Shilling & Co., expect declines of about 18%.

Mr. Shilling, whose firm provides economic consulting and investment advice, said excess inventories, including those from looming foreclosures, will pull prices down. Mr. LaVorgna said a rapidly recovering job market should soak up most of that supply. He added that much of the excess supply is in remote or economically depressed regions and so isn't relevant to most potential buyers, who will instead bid up prices in more desirable areas.

MacroMarkets, based in Madison, N.J., was co-founded by Robert Shiller, an economist at Yale University who helped create the Case-Shiller indexes. MacroMarkets creates securities that let people bet on the direction of various types of assets, including residential real estate. The survey by MacroMarkets was the first of what it says will be a monthly series involving about 100 analysts.

Mr. Shiller, who didn't contribute a forecast for the survey, said in an interview that the average prediction of a 12% price rise over five years was "a plausible scenario." During the housing boom, Mr. Shiller drew attention for bearish house-price comments that were far gloomier than the consensus but eventually proved to be on the mark.

The Census Bureau also reported that single-family building permits in April fell 10.7% from a month earlier to a seasonally adjusted annual rate of 484,000. Ms. Zelman said builders have slowed down now that it is too late for buyers to get the federal tax credit.

Before ramping up construction again, she said, builders will await signs that demand "isn't falling off a cliff" after being temporarily buoyed by the tax credit.

Ms. Zelman forecast that single-family housing starts for all of this year will total 559,000. That would be up 26% from 445,000 in 2009, but still off 67% from the peak level of 1.72 million in 2005. Ms. Zelman expects demand to be constrained by high unemployment, tight credit and the large number of Americans unable to sell their current homes because they owe far more than the market value.

Source: Wall Street Journal

Home Appraisals Still Fraught With Uncertainty Despite New Code of Conduct

The recently launched system is intended to provide more honest valuations. But the use of third-party appraisal management companies has led to complaints.

Little known outside the housing industry — and little understood inside the business — the Home Valuation Code of Conduct (HVCC) was supposed to result in better, more honest appraisals. But a year after it was put in place there is still a question of whether home buyers are getting their money's worth.

Real estate professionals, home builders, mortgage brokers and even some appraisers themselves complain that lenders are using appraisers who lack experience, sometimes travel great distances to divine values in unfamiliar jurisdictions or base their determinations on sales that are not similar to the property they are appraising.

Negotiated by New York Atty. Gen. Andrew Cuomo with Fannie Mae and Freddie Mac, the two government-sponsored secondary-mortgage-market institutions that help keep the money flowing to primary lenders, the code effectively blocks anyone who has a financial stake in a transaction from pressuring the appraiser to "hit the number" necessary for the lender to approve the loan.

That's a laudable goal that everyone agrees was long overdue. But the antagonists say their issues aren't with the HVCC itself but how the lending community has implemented it.

Instead of erecting their own firewalls between real estate agents and loan brokers on one side and appraisers and underwriters on the other, most lenders have turned the appraisal-ordering task over to third-party appraisal management companies. And, not surprisingly, the AMCs say the complaints are way overblown.

The Title Appraisal Vendor Management Assn., the trade group for AMCs, says that on average its member appraisers travel only short distances and have 15 years of experience. And the AMCs maintain that they use only licensed and certified appraisers who, under industry standards, must refuse assignments in unfamiliar markets.

On first blush, buyers and sellers may not think they have a role in this fight. But they do. Buyers need to know they are not overpaying for a property, and sellers, at least in the current down market, sometimes have to come to grips with the possibility that the old homestead isn't worth as much as they think it is. So if an appraisal isn't accurate, both sides suffer.

To some extent, agents, brokers and builders have to get real, too. AMCs aren't going away. The HVCC is now firmly embedded in the mortgage-approval system, and the market is what it is.

At the same time, though, their complaints have some validity, which raises the question of what to do if you have some reason to doubt the value an appraiser ascribes to your house.

For starters, if you or your agent believes the appraiser has violated the standards of his or her profession or is downright incompetent, by all means, report him — to his company, to your state licensing agency and even to the police or FBI if you think he may be involved in some type of fraud. Each has a procedure for filing complaints.

If you think the valuation has come in way too low, you need to appeal, but with as much finesse as possible. Realize that if the lender orders the appraiser to take a second look, it's like telling him he was wrong the first time.

Of course, you can always ask for a second opinion from another appraiser. But you'll have to pay for that one, too. Moreover, to stand any chance of winning your point, the second valuation must be more than 5% higher than the first. Anything less is considered an acceptable difference.

Besides, even if the second appraisal is far above the first, it's the lender, not you, who gets to pick the appraisal on which the loan is based.

Although it may seem as though the cards are stacked against the customer, you can even the playing field by suggesting the appraiser assigned by the lender erred and requesting that he be asked to take a second look. And you can do some of the homework on your own searching out "comparables" that the appraiser may have missed the first time around. Cast the net widely by finding newly built homes and those marketed by agents who are not Multiple Listing Service members.

Remember, though, that you are not just looking for sales in the same general neighborhood. You want at least two, but preferably three, of the same style (ranch to ranch, for example, not ranch to two-story colonial), size and features. Also, sales should be no more than 6 months old and the more recent the better.

Look at the comps cited by the appraiser. Although the appraiser is required to go inside the property, he does not have to do that with the comps upon which he bases his valuation. More often than not his knowledge of them is based entirely on their description in the MLS or the public land records.

If a comp or two was sold at foreclosure, you have to make sure that the previous owners didn't gut them. Properties that have been mistreated not only sell for less, but they are also hardly similar to well maintained houses. However, the appraiser won't know that unless he gets inside.

The trick here is to find as many differences as possible in your favor, differences the appraiser may not have known about or failed to consider.

Source: L.A. Times