FHA "Anti-Flipping" Rule Extended

The Federal Housing Administration (FHA) has extended its 90-day "no flip" rule on recently rehabbed properties for another year. The ruling, which allows investors who acquire foreclosed properties at below-market value to be exempt from waiting the customary 90 days before reselling them, was set to expire at the end of January 2011. Vicki Bott, deputy assistant secretary for single-family housing at the FHA, said that first-time buyers have responded overwhelmingly to the opportunity to buy "turnkey" renovated homes with low down payments and they have performed well on their mortgage obligations.

The 90-day waiting period originally was put in place to protect FHA borrowers against predatory practices of flipping where properties were quickly resold at inflated prices to unsuspecting borrowers. Bott said that while the FHA is concerned about flipping in general, they have not seen any of the fraud problems, defaults and re-foreclosures that cost the agency millions in insurance payouts in earlier years

Source: HUD

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New Healthcare Reform Law Does Not Alter Capital Gains Exclusions

Misinformation has been circulating again on the Internet and in e-mails recently that the healthcare reform bill passed last year includes a sales tax on real estate. This information is incorrect, and C.A.R. would like to clarify the information. The new law imposes a 3.8 percent tax for households in the top tax brackets on "unearned income." This includes capital gains. However, this will not impact the exclusion on capital gains earned from the sale of a primary residence up to $250,000 for individuals and up to $500,000 for married couples. The 3.8 percent tax will only apply to capital gains above the normal exclusion.

Source: National Association of Realtors

New Foreclosure Cases in California Fall Sharply in Fourth Quarter

A total of 69,799 notices of default were filed in the state in the fourth quarter of 2010, down 17.5% from a year earlier. Actual losses of home to foreclosure fell 30.6% from the fourth quarter of 2009.

A new report shows the number of California homes entering foreclosure fell sharply in the fourth quarter as fewer borrowers fell into distress and lenders eased off taking action because of increased scrutiny from regulators.

Actual losses of homes to foreclosure were down as well.

It wasn't clear how much of the easing resulted from investigations by federal agencies and all 50 states after widespread reports of foreclosure procedural errors and complaints that too few loans were being modified to help borrowers.

A total of 69,799 notices of default, the first step in a foreclosure, were filed at county recorder offices in the Golden State during the fourth quarter, MDA DataQuick Information Systems reported Tuesday.

That was down 16.2% from 83,261 in the third quarter, down 17.5% from 84,568 in the fourth quarter of 2009, and just over half the record 135,431 default notices recorded in the first quarter of 2009.

DataQuick said the riskiest loans, such as those written without verifying high-risk borrowers' incomes and assets, peaked in 2006. Because many of those loans have already resulted in foreclosures or distress sales, the worst problems with new defaults on subprime loans are behind the industry, although the backlog of distressed loans remains enormous.

In the meantime, the economy has begun a slow recovery so fewer borrowers are losing their jobs.

"We don't know how much of the decline [in new foreclosures] is due to less household financial distress and how much is due to shifts in lender and servicer foreclosure policies," DataQuick President John Walsh said. "The level of default activity would certainly be higher if it weren't for alternative strategies such as short sales or even lengthening grace periods."

At a mortgage modification fair at the Los Angeles Sports Arena sponsored by the nonprofit Neighborhood Assistance Corp. of America, founder Bruce Marks said lenders are pushing harder to increase the number of modifications. California is a hot spot for the group because of the large number of risky loans made to homeowners.

"You see more of these types of mortgages than in any other part of the country," Marks said Monday.

DataQuick said that in areas with high home prices, mortgage defaults bucked the general trend and rose slightly quarter over quarter. The 82 California ZIP Codes with median sale prices of $800,000 or more in 2010 logged a 2% increase in default notices from the third quarter.

At the other end of the spectrum, ZIP Codes with 2010 median sales prices of $200,000 or less saw fourth-quarter defaults drop 22.2 % from the third quarter.

As for the big picture in Southern California, Riverside and San Diego counties saw the greatest declines in new foreclosures, down about 25% year over year. They were down 21% in Orange and San Bernardino counties, 15% in Los Angeles County and 11% in Ventura County.

Southern California overall saw 19.71% fewer new foreclosures than a year earlier and 16.6% fewer than in the third quarter.

In the San Francisco Bay Area, new foreclosure filings fell 11.7% compared with the fourth quarter of 2009, reflecting the fact that the pricey area saw much less high-risk lending during the boom years, said DataQuick analyst Andrew LePage.

Most large mortgage servicers halted foreclosure sales in many states during the fourth quarter to review their procedures in response to complaints that homes were being seized despite such errors as "robo-signing" by employees who certified documents they never read.

Trustee deeds recording the loss of California homes to foreclosure totaled 35,431 during the fourth quarter, DataQuick said. That's down 21.9% from the third quarter and 30.6% from a year earlier. The all-time peak was 79,511 in the third quarter of 2008.

Sean O'Toole, founder of data tracker ForeclosureRadar, said the slowdown was mostly attributable to banks freezing activity during their reviews of foreclosure procedures.

Early indications showed foreclosures moving up a tick as the new year began. O'Toole said notices of default rose 8% in California during the first week of 2011 compared with the first week of 2010.

Source: Los Angeles Times

Homeownership Still Good Long Term Decision, Survey Reveals

The recently released study, American Attitudes about Homeownership, conducted by Harris Interactive for the National Association of Realtors® (NAR) reveals that homeownership still ranks high among the list of smart financial decisions.

Ninety-five percent of owners and a whopping 72 percent of renters believe that over a period of several years, it makes more sense to own a home than not. Seventy-seven percent of homeowners believe that homeownership will help them meet long-term financial goals.

But one cannot ignore the touch economic conditions being felt across the nation. Even through it's positive tone, the survey found that the majority of homeowners and renters believe the country is on the wrong track. Forty percent believe the economy will remain the same in 2011.

And for eight percent of homeowners and nine percent of renters -- being able to afford their mortgage or rent is a real and valid concern. Thirty-five percent of homeowners and forty-six percent of renters report that their monthly mortgage is at least a moderate strain.

Yet, according to the survey, "both homeowners and renters recognize the financial and non-financial benefits of owning a home. Nearly two-thirds of homeowners (63 percent) and renters (65 percent) consider the financial and non-financial benefits of homeownership equally important."

They are right. Homeownership is about more than just reaping financial benefits. The survey reveals that "a larger share of homeowners than renters describe their communities as safe and stable. Homeowners also report that they are more satisfied with their community and family life. While many factors contribute to a positive community environment, a large percentage of homeowners and renters believe a high rate of homeownership is one factor. Homeowners generally feel more connected to their communities, participate in community and civic activities more frequently and are more likely to know their neighbors well."

The majority of homeowners also agree that owning a home means a stable atmosphere for raising a family.

And it's little wonder why renters aspire to homeownership, when renters ranks their quality of life lower than homeowners. Just 33 percent of renters report that they are "very" or "extremely" satisfied with their family life. More than half of homeowners do so. That's why 6 out of 10 renters desire to become homeowners.

NAR President Ron Phipps notes, “Given strong public support of and aspirations toward owning a home, we need to keep policies in place that support and encourage responsible, sustainable home ownership for our future.”

Source: Realty Times