Realtors Archives

Mike Butler’s Friday’s Open Forum Question and Answer Session for Real Estate Investors

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Not long ago, first-time buyers accounted for 40% of home sales.

Now they’re down to 29% and falling, experts say, as first-time buyers confront a steady accumulation of rising fees, costs, and rates.

This month, fees on most new mortgages will rise by up to 0.50%. In April, fees on small-down-payment mortgages, a first-time buyer favorite, will spike.

Without a house to sell , first-time home buyers have had a field day in the depressed housing market. Until recently, anyway.

A series of new rules, regulations and policies have changed the Click Here for Full Video/Article (Members Only)

A broad agreement could be struck within two months to overhaul how millions of foreclosures are handled by the nation’s biggest banks and to expand the use of home loan modifications, according to Tom Miller, the attorney general of Iowa.

WASHINGTON — All 50 state attorneys general, along with federal regulators, have been stepping up pressure on the mortgage servicers over their foreclosure lapses in recent days and presented them with an outline of a settlement late last week. But when Mr. Miller made his comments at a press conference here on Monday, it was the first time officials have said when an agreement might come.
“I’m hoping we can wrap it up in a couple of months,” he said. “That’s a hope, but we’re going to move as fast as we can.”

There have been reports that a broad settlement with the banks was imminent, but Mr. Miller played down that prospect, citing thorny issues like the question of just which homeowners should benefit from the proceeds of any settlement.

The attorneys general and federal government agencies are pressing for a financial settlement that could total over Click Here for Full Video/Article (Members Only)

WOW! This could be huge. My experience has been borrowers can only get a 30 year loan when the lender has the opportunity to “sell the loan” to Fannie Mae or Freddie and get “reimbursed” the money loaned.

Many local banks have worked with investors by offering “in house” loan products with shorter terms and calls.

Mike Butler

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How might home buying change if the federal government shuts down the housing finance giants Fannie Mae and Freddie Mac?

The 30-year fixed-rate mortgage loan, the steady favorite of American borrowers since the 1950s, could become a luxury product, housing experts on both sides of the political aisle say.

Interest rates would rise for most borrowers, but urban and rural residents could see sharper increases than the coveted customers in the suburbs.

Lenders could charge fees for popular features now taken for granted, like the ability to “lock in” an interest rate weeks or months before taking out a loan.

Life without Fannie and Freddie is the rare goal shared by the Obama administration and House Republicans, although it will not happen soon. Congress must agree on a plan, which could take years, and then the market must be weaned slowly from dependence on the companies and the financial backing they provide.

The reasons by now are well understood. Fannie and Freddie, created to increase the availability of mortgage loans, misused the government’s support to enrich shareholders and executives by backing millions of shoddy loans.

Taxpayers so far have spent more than $135 billion on the cleanup.

The much more divisive question is whether the government should preserve the benefits that the companies provide to middle-class borrowers, including lower interest rates, lenient terms and the ability to get a mortgage even when banks are not making other kinds of loans.

Douglas J. Elliott, a financial policy fellow at the Brookings Institution, said Congress was being forced for the first time in decades to grapple with the cost of subsidizing middle-class mortgages. The collapse of Fannie and Freddie took with it the pretense that the government could do so at no risk to taxpayers, he said.

“The politicians would like something that provides a deep and wide subsidy for housing that doesn’t show up on the budget as costing anything. That’s what we had” with Fannie and Freddie, Mr. Elliott said. “But going forward there is going to be more honest accounting.”

Some Republicans and Democrats say the price is too high. They want the government to pull back, letting the market dictate price, terms and availability.

“A purely private mortgage finance market is a very serious and very achievable goal,” Representative Scott Garrett, the New Jersey Republican who oversees the subcommittee that oversees Fannie and Freddie, said at a hearing this week. “No one serious in this debate believes our housing market will return to the 1930s.”

Still, powerful interests in both parties want the government instead to construct a system that would preserve many of the same benefits, with changes intended to minimize the risk of future bailouts. They say the recent crisis showed that the market could not stand on its own.

“The kind of backstop that we have now, if it didn’t exist, we would have had a much more severe recession and a much sharper fall in home values,” said Michael D. Berman, chairman of the Mortgage Bankers Association, which represents the lending industry.
Hanging in the balance are the basic features of a mortgage loan: the interest rate and repayment period.

Fannie and Freddie allow people to borrow at lower rates because investors are so eager to pump money into the two companies that they accept relatively modest returns.

The key to that success is the guarantee that investors will be repaid even if borrowers default — a promise ultimately backed by taxpayers.

A long line of studies has found that the benefit to borrowers is relatively modest, less than one percentage point. But that was before the Click Here for Full Video/Article (Members Only)

Discover How Work Orders for your real estate business can make you money and save time while ensuring everything gets done. This simple system has built-in “checks and balances” with everything from the scheduled date to keeping tracking of material and labor.

This is a must for every investor and landlord.

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Real Estate marketing tips made simple for your real estate business and any business you own.

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FEDERAL Housing Administration mortgages, the government-insured loans that have surged in popularity in recent years, will be getting slightly more expensive this spring.

The F.H.A. announced this month that it was raising the annual mortgage insurance premium for borrowers by a quarter of a percentage point — to 1.1 or 1.15 percent of the loan amount for 30-year fixed-rate loans, and 0.25 or 0.50 for 15-year or shorter-term loans.
The higher premium applies to F.H.A. loans taken out on or after April 18.


The agency called the change a “marginal increase” that would be “affordable for almost all home buyers who would qualify for a new loan.”

But industry experts say that some consumers, especially those considered marginal borrowers, may now be prevented from buying or refinancing a property.
The annual premium for 30-year loans was already changed in November, to 0.85 percent or 0.9 percent; the level used to be 0.50 percent or 0.55 percent. (The annual premium for 15-year or shorter-term loans, previously zero to 0.25 percent, did not change at that time.)
“It’s going to make fewer people qualify” for the loans, said Michael Moskowitz, the president of Equity Now in New York. “It’s the equivalent of a quarter-point increase in interest.”
The increase does not apply to F.H.A. loans already in place, or to F.H.A. reverse mortgages or home-equity conversion (HECM) loans.
According to the housing administration, the new rate structure would raise the cost of a $157,000 mortgage, a typical F.H.A. loan amount, by about $33 a month, or $396 a year.

The agency requires that all borrowers of loans it insures pay the premium.

Consumers with non-F.H.A. loans who put down less than 20 percent are typically required by their lenders to take out private mortgage insurance, to insure the lender against the risk of default.
F.H.A. loans are typically taken out by those who cannot qualify under the stiffer down-payment and credit-score requirements of Fannie Mae or Freddie Mac, the government-controlled buyers of most loans.
The housing agency requires at least 3.5 percent, while Fannie Mae typically requires 5 to 15 percent, or more. Last November, F.H.A. began requiring a minimum credit score of 500, and for credit scores below 580 — a level at which Fannie and Freddie do not back loans — a 10 percent down payment.
Last year, more than 19 percent of all residential mortgages, and more than 30 percent of all home purchases, were made with F.H.A. loans.

In 2005, F.H.A. loans made up just over 4 percent of residential mortgages, and nearly 5.6 percent of home purchases.
Since the mortgage crisis began in 2008, “F.H.A. has been the only haven for borrowers,” said Sean Welsh, a senior loan officer at Campbell Financial Services in West Haven, Conn.
But the agency’s capital reserves have fallen below levels mandated by Congress, which is why the rise in the annual insurance premium was authorized.
Mr. Welsh said the increase, while “not too bad,” was still “additional pain” atop the November change.
F.H.A. loans used to be the province of niche lenders, but in recent years big banks have entered the market in a big way.
In fact, Wells Fargo recently lowered its minimum required credit score for an F.H.A. loan to 500 from 600. The bank also reduced its required debt-to-income ratio, or the amount of a borrower’s gross monthly income that can go toward paying off debt, to 43 percent.

For lower-credit F.H.A. borrowers, the bank raised its minimum down payment to 10 percent.
“We don’t anticipate a significant impact on individual consumers from the mortgage insurance premium hike,” said Tom Goyda, a Wells Fargo spokesman. “F.H.A. is still an important source of funding for first-time home buyers and those who don’t have a lot for a down payment.”

By Lynnley BrowningFor more: http://nyti.ms/eqMIIf

Question:

Mike, there are some foreclosures we can not bid on because it goes to potential homeowners first. Isn’t that discrimination? Can they get by with it?

Thanks Mike,
Farril

 

ANSWER:

Great Question Farril. Sorry, but you lose on this one.

HUD has been doing since I started investing decades ago.

“Investors Are NOT a Click Here for Full Video/Article (Members Only)

Freaked by the housing market , more would-be home buyers are opting for rentals driving rents up along the way.
But it’s not just rising rents that new renters have to worry about. A handful of new costs could make renting less than the bargain it appears.
The average national vacancy rate for rentals fell 17% last year to 6.6%, according to Reis, Inc., which tracks rental performance data. And as renting has gotten more popular, prices have jumped.
The average monthly rent, including studios, one- and two-bedroom apartments is now $986, based on Reis data. Before the recession, the average was just $930.
And in some markets, it’s far worse: In New York, rents are up 9% on average in the last five years; in San Jose, they’re up 8%.
The market is only likely to get tighter.
For the first time in memory, the federal government is actively encouraging people to rent, rather than buy.
The Obama administration’s recent housing proposal calls for Click Here for Full Video/Article (Members Only)
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