Tougher requirements, economy shrink FHA loan share

Hitting the Brakes on Auto Dealer Loans

Tougher qualifying standards, tight credit, weak job growth, concerns over job security, and the inability of homeowners to sell their homes for enough to pay off their mortgage and buy another house are all contributing factors.

by Broderick Perkins
© 2010 DeadlineNews.Com

Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - As predicted, tougher underwriting rules are cutting into the share of Federal Housing Administration (FHA) loans, loans that largely took the place of toxic subprime loans after the housing meltdown.

The share of borrowers using government-insured FHA home loans fell to its lowest level in 27 months in February, based on an analysis of 20 large housing markets nationwide by San Diego, CA-based DataQuick Information Systems.

DataQuick surmises recent changes to qualifying standards for FHA mortgages and lenders' own tighter requirements are both contributing to the decline in the number of buyers using the loans.

Weak job growth, concerns over job security, and the inability of homeowners to sell their homes for enough to pay off their mortgage and buy another house are also factors.

In February, 33.3 percent of the purchase mortgages used in metro areas were FHA-insured, down from 34.2 percent in January and 38.2 percent in February 2010, DataQuick reported.

Last month's figure was the lowest since FHA loans made up 33 percent of the purchase loan market in November 2008.

FHA loans, a small fraction of all mortgages before the housing boom went bust, peaked at an average 41.1 percent of all home purchase loans in November 2009. During the bust, some high cost regions saw FHA loans soar to 50 percent or more of all purchase loans.

Dataquick reported FHA use in February varied from as little as 10.3 percent of all purchase loans in the Honolulu area to as much as 43.2 percent in the Orlando region.

FHA loans have been very popular with first-time buyers and some move-up buyers in recent years after easy-money subprime lending melted down with the credit crunch of the bust. The meltdown made non-government-insured home loans, especially low-down-payment mortgages, more difficult to obtain and FHA loans became the alternative.

The median price paid for a home bought with an FHA loan in February was $195,000, the same as in January but down 2.5 percent from $200,000 a year earlier.

The median FHA purchase loan amount in February was $187,668, up slightly from $186,500 in January but down 4.4 percent from $196,278 a year ago.

FHA loan limits vary by region. but can be as high as $729,750 in the nation's costliest housing markets.

As the FHA loan share has fallen government-insured VA (Department of Veterans Affairs) loans are up.

Dataquick says VA loans represented 6.4 percent of all home purchase loans made in February, virtually unchanged from 6.5 percent in January, but up from 5.5 percent a year earlier. In recent years, the peak for VA loans, which do not require a down payment if certain conditions are met, was 6.7 percent in December 2010.

Among the metro areas DataQuick surveyed, the percentage of VA purchase loans was highest in Honolulu (18.9 percent), San Diego, CA (15.3 percent), Washington D.C. (13.8 percent), Seattle, WA (10.6 percent) and Las Vegas, NV (10.4 percent).

The VA share of purchase loans was lowest in the San Jose, CA metro area (0.9 percent), New York, NY (1.1 percent) and Los Angeles/Orange counties, CA (2.4 percent).

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How to thaw your frozen HELOC

Save the planet. Shower pee!

The Federal Reserve offers the latest come-to-your-rescue tips for dealing with a home equity line of credit that's been hammered. Links in the story lead you to still more.

by Broderick Perkins
© 2008 DeadlineNews.Com

Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - Lenders are freezing, slashing, and cutting off home equity lines of credit, but there's a growing manual of strategies you can use to avoid or mitigate what could be financially debilitating.

Maybe it's better to take the equity money and run before lenders make a move.

Lenders are only covering their assets when they reduce your home equity line of credit (HELOC), much as they are doing with credit card holders, who can also use strategies to get that credit back.

When your lender issued you the credit card-like line of credit backed by your home, chances are, your home value was much higher.

Now with shrinking values, lenders want to shake you down to reduce the chance they won't get paid should you default on your home -- which now may be worth less than the total of your outstanding mortgages.

Consider it a home equity loan meltdown as home equity stakes have been stumped.

Maybe you didn't use proper home equity protection practices.

In any event, the Federal Reserve offers the latest come-to-your-rescue tips for dealing with home equity that's been hammered.

Links throughout this story all also offer additional tips about protecting what you've got and restoring what you lost in the way of home equity credit.

• Read the notice your lender sends you. Your HELOC lender must provide you a written notice if they have frozen or reduced your HELOC. Your lender must send the notice to you no later than three business days after the freeze or reduction. The notice also must include information about any other changes to your HELOC.

• Call your lender. Even if you have a good payment record, if your home's value has fallen, your lender may freeze or reduce your HELOC. Contact your lender if you have questions or concerns about a freeze or reduction.

• Learn why your lender froze or reduced your HELOC. A freeze or reduction notice should include specific reasons for the action. The most common reasons for a HELOC freeze or reduction are, again, a decline in the value of your home, or a change in your financial circumstances.

Understanding your lender's reasoning may help if you want to take steps to have your credit line reinstated to its original amount. For example, a lender may not be aware that you made significant equity saving home improvements to help shore up the value of your home and its equity.

Or, if your financial circumstances changed for the worse and that change resulted in a lower credit score, investigate ways to rebuild your credit.

• Ask your lender how to have your HELOC reinstated. Your lender must reinstate your credit privileges when the conditions permitting the freeze or reduction no longer exist. You may need to put in writing your request to have your line of credit reinstated. Once your lender receives your written request, they must promptly investigate and determine whether your HELOC can be reinstated.

• Remember that your lender can impose fees for reinstating your HELOC. Fees include costs for an appraisal or credit report. Your lender cannot, however, charge you a fee to reinstate your credit line once the condition that caused them to freeze or reduce your HELOC no longer exists.

For more information:

• More home equity news that really hits home is available from the Deadline Newsroom.

• From DeadlineNews.Com's archival vault, still more home equity news that really hits home.

New federal consumer protections for HELOCs in the pipeline.

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© 2008 DeadlineNews.Com

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Home financing to remain tight at least until 2010

We've gone offbeat!
Quick! Click my head!

With the squeeze on money to finance growth in a sector considered a major cornerstone of the national economy, Brookings Institution Senior Fellow Anthony Downs has written a book that paints a grim picture of what's in store for mortgage money and the housing market.

by Broderick Perkins
© 2008 DeadlineNews.Com


Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - Among likely scenarios for the mortgage money market, it's most likely that home financing funds won't begin to really flow until 2010 and it could take up to three years before the credit crunch fully disappears.

With the squeeze on money to finance growth in a sector considered a major cornerstone of the national economy, Brookings Institution Senior Fellow Anthony Downs has written a book that paints a grim picture of what's in store for mortgage money and the housing market.

"Real Estate and the Financial Crisis" ($29.95, Urban Land Institute) says only time, cheaper real estate prices, a more balanced comparison between real estate and other asset values and higher profits for property owners will just begin ease the crunch.

Downs proposes four possible scenarios and the likelihood of each.

• 1. A weak U.S. recession with the speedy return of credit availability by late 2009; a 15 percent likelihood of occurring.

• 2. A strong U.S. recession in 2009, continued lack of real estate credit availability until 2010; 65 percent.

• 3. A serious U.S. recession, collapse of the dollar, higher interest rates and a prolonged recession through 2010; 8 percent.

• 4. A two- to three-year recession, massive federal spending, inflationary pressures, high interest rates;12 percent.

There will be no return to the easy availability of financial credit for real estate during most or all of 2009. Only in 2010 and beyond will such a return be possible, though certainly not assured. That situation is consistent with the likelihood of the 2008-2009 American recession lasting well into 2010." -- Anthony Downs, 'Real Estate and the Financial Crisis'

Downs also says a few fundamentals are likely.

• The credit crunch will not end quickly, but will take at least one more year and perhaps up to three more years to disappear.

• Real estate capital markets will gradually improve as investors become impatient with low yields on other assets and as more property owners accept the need to give investors higher returns.

• The fate of real estate capital markets is tied to the performance of non-real estate investment trust sector of the broader stock market. The better the stock market sector does, the longer it will take for real estate to recover.

The book delves into an analysis of how the financial markets crashed and the resultant fallout in the housing market, commercial property markets and mortgage backed securities.

It also analyses public policy responses and recommends future policies to improve the financial system with new approaches for operating within a shrinking financial system; by responding to a shift in housing and financial policies, and through approaches for stabilizing commercial real estate markets.

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© 2008 DeadlineNews.Com

Need a break from doom and gloom in the housing market? Get off the beaten news track and stop by the DeadlineNews Group's Offbeat News Examiner outlet for a few laughs.

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop. Perkins is also a National Real Estate Examiner. All the news that really hits home from three locations -- that's location, location, location!

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Why buyers aren't buying, how they can

The National Association of Homebuilders reveals why buyers aren't buying, but the trade group also reveals what's necessary to change that trend.

by Broderick Perkins
© 2008 DeadlineNews.Com


Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - Listings that languish unsold, the credit crunch and expectations that prices have yet to hit bottom are keeping consumers out of the homebuying market, according to the National Association of Home Builders (NAHB).

But the NAHB is working to help change that condition.

Telling it like it is, the NAHB surveyed member builders who responded:

• 91 percent of prospective home buyers say they are staying out of the market because they can't sell existing homes. (Many buyers use existing home equity -- when it's available -- to move up, down or simply buy anew.)

• 88 percent are reluctant to buy because of fears about employment and the economy. (It's the new NINJA -- No Income, No Job or loan Approval)

• 75 percent said that buyers believe home prices will drop more. (This could actually be a dangerous reason not to buy. You'll never see the bottom of the market until the market has already started to move up. Depending upon the pace of the next move up, prices could rise so fast you'll get priced out of the market before you get it. It happens.)

• 68 percent said buyers believe it is hard to get financing. (But not impossible. Learn about mortgages that have survived the crunch.)

• 34 percent said buyers are staying out of the market because they think that interest rates will drop in response to government action.

The percentages add up to far more than 100 percent because most buyers voiced numerous concerns that put them on the fence.

"These results make it clear that Congress must include significant housing measures in any economic stimulus legislation that it enacts," said David Crowe, NAHB's chief economist.

"Traditionally, housing leads the economy into recession and is the first sector to recover. Until we can stop the freefall in home values and get home buyers back into the market, the economy will stay mired in recession," Crowe crowed.

Vote for Crowe. NAHB has the right idea. It's in line with the new President Barack Obama administration's approach to economic ills.

Fix Housing First, a coalition of more than 600 housing-related groups headed by NAHB, is urging Congress to enact several measures that will help get buyers back to buying.

Measures include an expanded home buyer tax credit that does not have to be repaid, mortgage rate buy downs to as low as 2.99 percent for homes purchased in 2009, and enhanced foreclosure prevention measures that will keep families in their homes and prevent additional inventory from flooding the market.

"Builders reported that current home sales are down dramatically in every price range compared to a year ago, but indicated that the declines are most pronounced in the upper ranges," Crowe said.

Sales of new homes priced under $150,000 have dropped 27 percent, and sales of homes in the $150,000 to $249,999 range are down 34 percent.

Sales of homes priced $250,000 to $499,999 dropped 57 percent, sales in the $500,000 to $999,999 range dropped by 64 percent, sales of homes costing $1 million or more were down 56 percent.

Builders are, however, doing their part and adapting to declining sales.

Eighty-nine percent of the builders surveyed said they are building lower priced homes, and 88 percent said they are building smaller homes, a trend that has accelerated since May of 2008.

"Like professionals in any industry, home builders are taking stock of market conditions and adjusting their products accordingly," he said.

"This shift is largely because first-time home buyers are an increasingly large share of the few buyers who are in the market."

© 2008 DeadlineNews.Com

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the Deadline Newsroom, DeadlineNews.Com's news back shop. Perkins is also a National Real Estate Examiner. All the news that really hits home from three locations -- that's location, location, location!

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Rumble In The Real Estate Jungle

Better days may be ahead but, right now? There's a real rumble in the residential real estate jungle. To fight your way through, you may have to put your state in your corner.

by Broderick Perkins
© 2008 DeadlineNews.Com


Unauthorized use of this story is a copyright violation -- a federal crime.

Deadline Newsroom - Hunker down, get a cut doctor for your household budget and brace yourself for some real toe-to-toe mayhem in the residential real estate sector.

The ferocious rate of foreclosures and the hammer lock on credit have crippled consumer confidence and put the national economy on the ropes.

Home prices are down for the count and, in this heavyweight of a fight for home ownership survival, it's likely to only get uglier.

If an effort to stop the bleeding and get housing up off the mat, there's a good chance your state can champion your cause if it's one up on federal efforts to help you save your home.

The Standard & Poors/Case-Shiller 10-City Composite and the 20-City Composite Home Price Indices through July 2008 reached new record annual declines of 17.5 percent and 16.3 percent, respectively. That was the 10th consecutive monthly report of a record decline for the 10-city data.

The weakest markets were in Las Vegas, NV with an annual home price decline of 29.9, followed by Phoenix, AZ, down 29.3 percent; Miami, FL, down 28.2 percent; Los Angeles, CA, down 26.2 percent; San Diego, CA, down 25 percent and San Francisco, CA, down 24.8 percent.

And, it ain't over.

Sixty-three percent of those answering a Deadline Newsroom poll "When Will Housing Recover?" say the housing market won't come back until 2010 or later. Nearly a third, 29 percent, say housing won't recover until after 2010. The 8 percent who said it would recover this year, have likely given up on that notion. Another 29 percent said 2009 will be the recovery year -- also a slim-to-none chance of a winning bet.

Lending credence to the newsroom poll is the documented risk of future home price declines. That risk increased in 94 percent of all 381 Metropolitan Statistical Areas (MSAs) tracked by PMI Mortgage Insurance Co. in its Fall 2008 U.S. Market Risk Index.

PMI said the majority of the increases were "statistically insignificant" but the risk of future home price declines rose by more than 10 percent in 16 of the nation's top 50 MSAs, primarily in areas that experienced major increases in house prices during the boom. Among the top 50 MSAs, 17 ranked in the highest risk category and 16 of those were in California, Florida, Nevada, and Arizona.

Risk scores translate directly into an estimated percentage risk that home prices will be lower in two years.

For example, the highest risk of future price declines was in Fort Lauderdale-Pompano Beach-Deerfield Beach, FL, where the risk score was 99.5 percent. That means area prices have a nearly 100 percent chance of being lower in two years. How much lower? That's anybody's guess.

Other high-risk areas included Riverside-San Bernardino-Ontario; CA (99.5 percent); Orlando-Kissimmee, FL (99.4 percent); Miami-Miami Beach-Kendall, FL (99.3 percent); and Tampa-St. Petersberg-Clearwater, FL (99 percent). Areas with the lowest risk of price declines -- less than one percent -- were in the Texan MSAs of Fort Worth-Arlington; Dallas-Plano-Irving and Houston-Sugar Land-Baytown, as well as Pittsburgh, PA.

The downward pressure on home values, along with the choke-hold on credit makes it ever more difficult for troubled home owners to refinance their way out of trouble or even sell out without a loss. Loan applications are off nearly 30 percent from a year ago, according to the Mortgage Bankers Association.

As many as 3.3 million home owners will default in 2007 or 2008 with more than 2 million of them losing their homes, according to estimates. But it's not just about the foreclosures. Those who manage to keep their homes are estimated to lose some $365 billion in home values due to downward price pressure caused by the foreclosed properties.

The mortgage-squeeze related fallout doesn't discriminate. Borrowers with high credit scores and prime loans also have a tough time refinancing or borrowing against their equity. Buying a home ain't easy either.

Luckily, a growing number of home owners and buyers have state-level housing efforts in their corner.

The exhaustive "Defaulting on the Dream: States Respond to America’s Foreclosure Crisis," by the Pew Charitable Trusts, reveals some assertive, even experimental efforts to mitigate financial harm to homeowners, lenders, local communities and state budgets.

• To help borrowers avoid foreclosure and keep their homes, 20 states (including California, Colorado, New York and Nevada) have launched formal foreclosure intervention or prevention initiatives.

• Sixteen states (along with those above, including, Indiana, Maryland, Massachusetts, Michigan, New Jersey, Ohio and Pennsylvania) have enacted both high-cost lending and foreclosure intervention laws.

• Thirteen states (among them Arizona, Illinois, Indiana, Iowa and Minnesota) have created counseling hotlines to help the foreclosure-at-risk, and several states are encouraging (too often reluctant) lenders to work with borrowers to find alternatives to foreclosure.

• Nine states (including Delaware, Maryland, Michigan and Ohio) have established loan funds that can be used to refinance borrowers who have loans they cannot afford or to provide short-term loans to help borrowers overcome financial difficulties.

• To protect vulnerable borrowers from unscrupulous real estate investors, nine states have created laws regulating firms that claim to "rescue" borrowers from default. Since the downturn, rescue operations have preyed upon vulnerable home owners.

• And in an effort to prevent problematic loans from being made in the first place, 31 states (among them, Arkansas, Georgia, Kentucky, Oklahoma, Texas and Utah ) have implemented laws that address predatory lending.

Check with your state housing, consumer, social or community agencies to determine what home owner and mortgage programs and assistance are available to help see you through hard times.

© 2008 DeadlineNews.Com

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Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the new Deadline Newsroom, DeadlineNews.Com's news back shop. In both cases, it's news that really hits home!

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