Short sales: Playing by the new rules

WASHINGTON – Dec. 8, 2009 – The U.S. Treasury hopes to speed transactions under its new short sale rules, but details count, and Realtors should understand the process if they hope to avoid delays. While the new rules become effective no later than April 5, 2010, lenders have been encouraged to make them official as soon as possible.

The new rules, released Nov. 30, 2009, as the Home Affordable Foreclosure Alternatives Program (HAFA), provide financial incentives to spark short sale or deed-in-lieu (DIL) closings. The change was made to grease the wheels of a short sale transaction, giving potential buyers a shorter wait time from contract signing to lender approval of the contract. It also should make a short sale more attractive to buyers by reducing the number of problems.

The rules do not necessarily simplify the amount or complexity of short sale paperwork, however. The oversight doc, Supplemental Directive 09-09, devotes four pages out of 43 to the new short sale requirements. Real estate professionals working with short sales should review the Short Sale section of the Supplemental Directive (pages 5-9) and review the forms and letters in Exhibits A and B. 

Condo rules could shut out buyers, hit builders

WASHINGTON – Dec. 8, 2009 – New lending rules for condominium buyers are already forcing some developers to change or scrap plans for new projects for fear too many buyers will be shut out. 

On Monday, the Federal Housing Administration started limiting the number of buyers in condo buildings that can get loans insured by the agency. The rules also put restrictions on buildings with poor finances, too many delinquent owners and a high number of rentals. 

The tighter lending standards are designed to protect the financial health of the FHA. Roughly 18 percent of loans insured by the FHA are either delinquent or in foreclosure, and the agency’s financial cushion has dipped below the federal minimum. 

But the move is a blow to condo buyers because the FHA has become a key source of mortgage financing. The agency insures roughly one in four new loans today because buyers need only a 3.5 percent downpayment. 

“It is a huge debacle for us,” said Rene Oehlerking, marketing director for Salt Lake City developer Garbett Homes. 

The company has canceled a 300-unit condo project, spending $300,000 to redesign it into freestanding homes. Most of the builders’ homes and condos this year went to buyers with FHA loans. 

Garbett’s condo project didn’t pencil out with the new FHA rule that allows only half of a condo building’s units to have FHA-backed loans, with some exceptions. That number falls to 30 percent in 2011. 

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FHA Single Family Housing

FHA Publishes Guidance on Condominium Processing:
FHA Mortgagee Letters 2009-46A & 2009-46B published on 11/09/09 provide updated guidance on condominium processing & project approval.

FHA Issues Guidance on Appraisals:
FHA mortgagee letter 2009-48 "Second Appraisal Reporting Requirements" modifies FHA’s requirements for second appraisals, eliminating the need for a second appraisal on high balance loans in declining markets.

FHA Issues Property Flipping Waiver:
Section 203.37a(b)(2) of the FHA regulations, 24 CFR, is hereby waived for a period of one year, September 14, 2009 through September 13, 2010, with regard to sales of previously foreclosed or abandoned properties acquired and resold by for-profit and non-profit entities using funding from and performing under agreements with state & local government agencies under the NSP program. More...


Foreclosure Rescue Scams Targeted:
Federal, state partners announce multi-agency crackdown targeting foreclosure scams & modification fraud. Read thepress release, Download the brochure. Visit:www.makinghomeaffordable.gov


FHA's Lender Insurance Program: 
FHA's Lender Insurance Program (LI) enables high-performing lenders to process FHA loans easier & more efficiently. LI lenders are better able to expand the availability of affordable FHA financing for potential homebuyers. Find out more.

Credit disputes could bar home loans

WASHINGTON – Oct. 27, 2009 – Mortgage loan applicants with a credit dispute on their records may find it impossible to get a loan, even if they have a score above 800 and a large downpayment, consumer watchdogs warn.

The problem stems from a Fannie Mae policy that requires lenders to hand-underwrite these loans, because that practice makes it harder for scammers to use the credit dispute law to hide bad credit experiences.

Denying people who are good credit risks a loan is frequently an unintended consequence, says Christopher Cruise, a mortgage originator and a founder of Responsible Loan Officers. “There’s no question – when there are lots of other applications and business is good,” applications requiring extra time and research “just aren’t going to move.”

The policy is “extremely unfair to honest consumers who are simply doing what they should – challenging misinformation,” says Evan Hendricks, whose newsletter Privacy Times outlined Fannie Mae’s policy in a recent report.

Fannie Mae says it is reviewing the policy and may change it.

Source: Washington Writers Group, Kenneth R. Harney (10/25/2009)

© Copyright 2009 INFORMATION, INC. Bethesda, MD (301) 215-4688

Senators differ on extending homebuyer tax credit

WASHINGTON (AP) – Oct. 27, 2009 – Top Democrats in the Senate are pressing a plan that would extend a popular tax credit for first-time homebuyers but gradually phase it out over the course of next year.

The proposal, by Majority Leader Harry Reid, D-Nev., and Senate Finance Committee Chairman Max Baucus, D-Mont., would extend the $8,000 tax credit – which expires Nov. 30 – through March 31. Its value would drop by $2,000 for each of the subsequent three quarters of 2010.

The plan, which could face a vote in the Senate this week, appears aimed at countering a far more generous $17 billion bipartisan plan that would extend the $8,000 credit through June 30, 2010, boost the income cap for eligibility and open the credit to all buyers, rather than first-timers.

Senators are maneuvering to add the homebuyer tax credit extension to legislation to extend unemployment benefits by up to 20 weeks. That bill faces a key test vote on Tuesday.

Supporters say the tax credit has helped revive the housing market and say that if it’s cut off as scheduled at the end of next month, home sales could drop off.

Reid sought to schedule a vote on the competing measures on Monday but was blocked by top Senate Republican Mitch McConnell of Kentucky, who is demanding votes on unrelated GOP proposals.

One such proposal would require people receiving unemployment insurance to be processed through the E-Verify program to prove legal immigration status and would require all federal contractors to use E-Verify. E-Verify is an Internet-based system that employers use to check on the immigration status of new hires.

The Democratic plan also would extend the ability of money-losing businesses to claim refunds on taxes paid during profitable times up to four years ago. All businesses could take advantage of the credit; when passed in February it was limited to smaller companies with annual revenues of $15 million or less.

The provision is especially popular with homebuilders who made huge profits in the housing boom but are struggling today. Critics say it’s a giveaway to some of the very companies that helped build up the housing bubble years ago.

New home sales blast past expectations

NEW YORK (CNNMoney.com) -- Sales of newly constructed homes leaped unexpectedly in July to hit their highest level since last September.

New homes sold at an annualized rate of 433,000 during the month, according to a joint report issued by the Census Bureau and Department of Housing and Urban Development.

That far exceeded analysts' forecasts and was up 9.6% from the revised 395,000 rate recorded in June. A consensus of industry experts surveyed by Briefing.com had predicted July sales of 390,000.

The news followed other positive housing market reports earlier this month, including a spike in existing home sales,home prices and affordability.

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Educate yourself to cut closing costs

ORLANDO, Fla. – June 12, 2009 – Home buyers dicker about appliances, cabinet styles and the move-in date, but often question little when it comes to a pricey part of their purchase.

Closing costs – fees paid at settlement – can add up to thousands of dollars.

Yet, the costs and settlement process are mysterious for many. Half of mortgage applicants in a 2007 Federal Trade Commission study could not identify their loan amount on settlement forms.

How do bewildered buyers figure out what’s supposed to happen and what they should be paying? In many cases, they don’t, or they take the word of the title company and lender.

To make sure you don’t overpay when buying a house, keep in mind that an economical closing begins with a good opening: start preparing early in the house hunt.

Alan Stacy, housing counselor with Consumer Credit Counseling Service of Greater Atlanta, says a dream applicant has her financial paperwork close at hand; boasts a minimum credit score of 720 for a conventional mortgage or 620 for an FHA loan; and has educated herself, perhaps on the Internet, about how mortgages work. Read more