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Latest Real Estate News
News ReleasesLead Paint Renovation Could Discourage Multifamily Repairs, Leasehold Deductions Top Management Concerns (May 20, 2006)
NAR: Pending Home Sales Ease (05/02/2006)
Home Mortgage Rates Jump in Past Week (04/07/06)
Mortgage Rates Inch Up This Week ( February 10, 2006)
EPA May Soon Regulate Home Renovations (02/02/06)
Average 30-Year Mortgage Dips to 6.22% (12/30/05)
NAR Welcomes Tougher Mortgage Guidelines (12/21/05)
Higher Rates Dampen Refinancing Activity (11/17/05)
Educate Yourself on Mortgage Fraud (11/01/2005)
HUD Revamps Homeownership Program (10/7/2005)
Mortgage Rates Rise Across U.S. (10/07/2005)
Foreclosure Risk Rising, But Only in Key AreasThe risk of foreclosure continues to climb, but it is concentrated in regions of the country with a souring economy or in areas where many homes were financed with subprime mortgages, according to a First American CoreLogic report.
The Core Mortgage Risk Index rose 1.6 percent form the third quarter, which is a slower rate of growth than earlier this year, says Mark Fleming, chief economist.
Fleming says the findings show that the brunt of the anticipated rise in foreclosures won’t be felt nationwide. The burden will fall on areas where local economies are struggling because of lay-offs, Fleming said.
It doesn’t matter to a home owner in Detroit — the riskiest mortgage market — whether he has a burdensome adjustable-rate mortgage or a more manageable fixed-rate loan if he no longer has a paycheck, Fleming says.
In contrast, rising foreclosures in California and Florida reflect a correction in home prices, Fleming says.
Overall, fewer than 2 percent of mortgage borrowers are at risk of foreclosure. In much of the rest of the United States home prices are stable, rising at about the rate of inflation. "As long as people have jobs there is little risk of delinquency and ultimate foreclosure," Fleming says.
Source: Reuters News, Jim Christie (10/18/07)/Realtor Magazine On-Line
Home Sales To Rise Gradually Into 2008After bottoming in the fourth quarter of 2006, existing-home sales are forecast to gradually rise through 2007 and into 2008, while new-home sales should turn around by summer, according to the latest forecast by the NATIONAL ASSOCIATION OF REALTORS®.
Annual totals for existing-home sales in 2007 will be comparable to 2006, says David Lereah, NAR’s chief economist.
“Keep in mind that we were still in boom conditions during the first quarter of 2006 with a high sales volume and double-digit price appreciation,” Lereah said. “We are starting 2007 from a relatively low point, so even with a gradual improvement in sales it’ll be pretty much of a wash in terms of annual totals.”
The good news, he says, is that a steady improvement in sales will support price appreciation moving forward.
2006 Sales Third-Highest on Record
Existing-home sales for 2006 are expected to come in at 6.50 million, the third highest on record, with a total of 6.42 million seen in 2007. New-home sales in 2006 should tally 1.06 million, the fourth highest on record, with 957,000 projected this year.
Total housing starts for 2006 are likely to be 1.81 million units, with 1.51 million forecast in 2007, which would be the lowest level in a decade. Builders are pulling back on new construction to support prices of remaining inventory.
The 30-year fixed-rate mortgage will probably rise to 6.7 percent by the fourth quarter of 2007. Last week, Freddie Mac reported the 30-year fixed rate at 6.18 percent, far below earlier consensus forecasts.
“The current interest rate environment and housing inventory levels present a window of opportunity for potential buyers,” Lereah says.
The national median existing-home price for all of 2006 is expected to rise 1.1 percent to $222,100, and then gain 1.5 percent this year to $225,300. The median new-home price, after rising only 0.3 percent to $241,600 in 2006, is projected to grow 3.0 percent in 2007 to $248,900.
Soft Landing for Housing
“With all the wild projections by academics, Wall Street analysts, and others in the media, it appears that much of the housing sector is experiencing a soft landing,” Lereah says. “Despite the doomsayers, household wealth will not evaporate and the economy will not go into a recession. If you’re in it for the long haul, housing is a sound investment.”
The unemployment rate is likely to average 4.8 percent in 2007, following a rate of 4.6 percent in 2006. Inflation, as measured by the Consumer Price Index, is expected to be 2.2 percent 2007, down from 3.2 percent last year, while growth in the U.S. gross domestic product is seen at 2.5 percent in 2007, compared with 3.3 percent last year.
Inflation-adjusted disposable personal income should grow 3.4 percent this year, following a rise of 2.7 percent in 2006.
— REALTOR® Magazine Online
Fallout Seen From Subprime Lender AbusesMore than two million subprime mortgage loans that lenders made during the boom years are in foreclosure, putting at risk $164 billion in wealth accumulation, according to a study by the Center for Responsible Lending.
“We are in the worst foreclosure crisis in modern American history,” Michael Calhoun, the organization's president, said at a recent press conference releasing the findings.
The study found that one in five households with a subprime loan now face losing that home. The study attributes that finding to aggressive tactics used by subprime lenders who prey disproportionately on minority households unfamiliar with the financing system but who are eager to build wealth through homeownership.
“We are talking about unwinding much of a generation’s effort to secure a place in the middle class,” Calhoun said.
One of the biggest problem loans has been what the mortgage industry calls the “exploding ARM,” a loan that after a short low-rate fixed period adjusts upward without regard to the direction that interest rate indexes are moving. Therefore, even if interest rates are heading down, these borrowers can face monthly mortgage payment increases, typically in the 30-40 percent range.
Real estate professionals can be in a position to help keep borrowers from getting locked into bad loans, but since the lion’s share of these loans are refinancings, real estate professionals typically don't have a chance to intervene, says Keith Corbett of the Center for Responsible Lending.
“The gatekeeper to the subprime market is the mortgage broker, making recommendations to borrowers," he says. "And mortgage brokers are among the least regulated participant in the marketplace.”
Trapped borrowers are a problem the NATIONAL ASSOCIATION OF REALTORS® has been addressing with its new series of brochures that practitioners can give to customers warning them to look carefully at all financing options before making a decision.
“We’re encouraging borrowers to contact their real estate professional right away,” says NAR President Patricia Vredevoogd Combs, who spoke at the press conference. “Borrowers still have an opportunity to salvage their situation by marketing their loan [to an investor] — that is, if they’re not upside down already."
NAR published the brochures in partnership with the Center for Responsible Lending but didn’t participate in CRL’s subprime foreclosure study. You can access NAR's brochures online at REALTOR.org.
— REALTOR® Magazine Online
Boston's Private Developments to Go Green
Boston is on the verge of becoming the nation's first major market to require private development firms to follow a strict series of green-building standards.
The standards will be required prior to permits being issued for any project measuring 50,000 square feet or larger.
The main objective is to make Boston buildings more energy efficient and environmentally friendly via the use of recycled materials, efficient heating and cooling systems, and other components.
A number of other large U.S. cities have established green building standards for public buildings or publicly funded developments. To date, however, none of the cities have imposed such conditions on private builders.
Developers will be required to certify that they have met the new standards, while the city will be tasked with confirming the developers' measures.
Some developers are concerned the new guidelines will make it more difficult to get projects off the ground.
The standards will likely be adopted by the Boston Zoning Commission next month.
Source: The Boston Globe, Thomas C. Palmer Jr. (12/20/06)
Study Shows Risky, Least Risky Housing Markets November 8, 2006
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| Mortgage Rates Drop Slightly Last Week September 15, 2006 The national average rate on a 30-year, fixed-rate mortgage was 6.43 percent last week, down slightly from 6.47 percent the week before but up from 5.74 percent a year ago, according to Freddie Mac.
The average for the 15-year, fixed-rate mortgage was 6.11 percent, down from the previous week’s 6.16 percent but again higher than the 5.32 percent average for the same period last year.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.1 percent, down from 6.14 percent. A year ago, the five-year ARM averaged 5.26 percent.
The average rate on one-year ARMs was 5.6 percent last week, compared with 5.63 percent the previous week and 4.46 percent a year ago.
“Although 30-year mortgage rates are about three-fourths of a percentage point higher than they were last year, it's good to keep in mind that rates have dropped from the high of 6.8 percent reached just eight weeks ago,” says Frank Nothaft, Freddie Mac vice president and chief economist. “And with short-term interest rate increases seemingly on hold, for a while at least, interest rates overall should not experience any big shifts in either direction.”
“The risk to our forecast of relatively stable mortgage rates is that inflation will unexpectedly heat up, causing bond markets to raise their expectations that the Fed will intervene by raising short-term rates,” Nothaft adds. “In that case, mortgage rates will again start to rise.”
— REALTOR® Magazine Online
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| NAR: 2006 Home Sales Forecast Lowered Home sales during the rest of the year will be lower than earlier projections as the market works its way through an inventory and price imbalance, according to the NATIONAL ASSOCIATION OF REALTORS®.
David Lereah, NAR’s chief economist, said the most obvious effect in the near term will be with home prices. “A year ago we had record home sales and tight supply with buyers bidding over the asking price,” he said. “This year sales are slowing, homes are plentiful and sellers are negotiating. Under these conditions, we’ll probably see prices dip temporarily below year-ago levels as the market works through a build up in housing inventory.”
“This is a normal pattern during a market correction, but home prices should return to positive territory within a few months and annual appreciation will be slower than historic norms,” Lereah said. “Keep in mind that over time, home prices rise at the rate of inflation plus one-to-two percentage points – buyers in most of the country who plan to stay in their home for a normal period of homeownership can pretty well bank on those historic averages, but people who purchased last year with the intent of flipping are likely to get burned.”
The national median existing-home price for all housing types is expected to grow 2.8 percent this year to $225,900, with the median new-home price rising only 0.2 percent to $241,400. New-home appreciation is dampened by builders offering incentives to reduce inventory.
Existing-home sales are forecast to fall 7.6 percent to 6.54 million in 2006, the third best year after consecutive records in 2004 and 2005. New-home sales should to drop 16.1 percent this year to 1.08 million, the fourth highest on record. Housing starts are projected to decline 9.6 percent to 1.87 million in 2006.
NAR President Thomas M. Stevens from Vienna, Va., said higher interest rates slowed home sales during the first half of the year. “The slowdown occurred mostly in higher cost markets, while other areas continued to expand,” said Stevens, senior vice president of NRT Inc. “The shift we’ve seen lately results from psychological factors with buyers on the sidelines trying to time the market. Both buyers and sellers need to understand what’s going on within their local market areas, so it’s even more important now to work with a professional who can guide you through current changes and the negotiation process.”
The 30-year fixed-rate mortgage is likely to rise to 6.7 percent in the fourth quarter. “Mortgage rates are one of the bright spots in the economy right now, with an unexpected decline recently in the 30-year fixed rate to a narrow range around six-and-a-half percent,” Lereah said. “This should encourage some of the nearly 4 million people who’ve found newly created jobs over the last two years.”
The unemployment rate is expected to average 4.8 percent for 2006, while annual inflation, as measured by the Consumer Price Index, is forecast at 3.5 percent. Growth in the U.S. gross domestic product should be 3.4 percent this year. Inflation-adjusted disposable personal income is projected to grow 3.5 percent in 2006.
--NAR Back to Top
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NAR: Home Sales Expected to Stabilize(July 11, 2006) --
Home sales are projected to ease modestly but should stay within a relatively narrow range during the balance of the year, according to the NATIONAL ASSOCIATION OF REALTORS®.“The major housing indicators have been moving up and down within a reasonable range, which means the market should even-out just below present levels,” says David Lereah, NAR’s chief economist. “At the same time, housing inventory levels are balanced in much of the country, so overall price appreciation will be at a normal rate. We should see home sales rise and fall month to month, but don’t look for any big shifts one way or the other.”Existing-home sales are expected to decline 6.7 percent to 6.6 million in 2006 from 7.08 million last year. That would still be the third-highest level on record. New-home sales should fall 12.8 percent this year to 1.12 million from 1.28 million in 2005. Housing starts are forecast to decline 6.8 percent to 1.93 million this year from 2.07 million in 2005.The 30-year fixed-rate mortgage is likely to reach 7 percent by the end of the year. “The uptick in interest rates has been slowing home sales,” Lereah says. “We remain concerned about the potential impact of higher interest rates in some of the more expensive areas of the country.”NAR President Thomas M. Stevens from Vienna, Va., says consumers who have been on the sidelines should feel more confident about the market normalization. “When it comes to big ticket purchases, buyers are more comfortable in a stabilizing environment,” says Stevens, senior vice president of NRT Inc. “At the same time, home sellers in most areas understand that the period of abnormal price growth is over, and they have become more realistic about the current market. This is helping to ease the pressure on home prices in some areas.”The national median existing-home price for all housing types is expected to rise 5.3 percent to $231,300 in 2006. With more construction in lower cost regions as well as price incentives that are helping to clear unsold inventory, the median new-home price should increase 1 percent this year to $243,300.The unemployment rate is projected to average 4.7 percent in 2006, while inflation, as measured by the Consumer Price Index, is forecast at 3.4 percent. Growth in the U.S. gross domestic product is expected to be 3.4 percent this year, and inflation-adjusted disposable personal income is likely to grow 3.1 percent.— NARREALTOR® Magazine Online
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Lead Paint Renovation Could Discourage Multifamily Repairs, Leasehold Deductions Top Management Concerns
(May 20, 2006) -- Proposed regulations under the Toxic Substances Control Act would require renovation and repair activities to be done in accordance with procedures to reduce lead paint exposure—a costly requirement that could discourage repairs, critics told REALTORS® at their 2006 Midyear Legislative Meetings & Trade Expo.
If adopted, the rules, issued by the U.S. Environmental Protection Agency in January 2006, would mandate that any repair or renovation disturbing two square feet of more of paint in a covered property be conducted by workers certified in lead-safe practices. Work would have to be done in a manner to limit airborne lead dust and be continually supervised. The regulations would also require companies to notify the EPA before any work was done and to keep records of all maintenance work in covered properties (those built before 1978).
The Institute of Real Estate Management (IREM) and the NATIONAL ASSOCIATION OF REALTORS® are working to convince the EPA that requirements for certification should be applied only to larger scale renovations, not minor repairs, said Charles Achilles, IREM senior vice president.
Achilles also touched on several other legislative issues affecting property managers and other commercial practitioners at the meeting. He noted that congressional bills supporting natural disaster insurance do not include provisions for multifamily and commercial structures. “These properties are essential parts of the community and also need protection,” he said. Natural disaster insurance programs would set up state backstops to assist insurance companies in the case of major disasters with extensive claims.
Achilles also noted that the federal tax bill just signed by President Bush did not include extensions of either the 15-year cost recovery period for the depreciation of leasehold improvements on commercial property or the deduction for brownfields improvement. These provisions, which benefit commercial property owners, both expired at the end of 2005. There is another tax bill in Congress that would extend these provisions through 2006, but its passage is uncertain, said Achilles.
— By Mariwyn Evans for REALTOR® Magazine Online
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NAR: Pending Home Sales Ease
(May 2, 2006) -- Pending home sales have slowed modestly as interest rates continue to rise, according to the NATIONAL ASSOCIATION OF REALTORS®.
The Pending Home Sales Index, based on contracts signed in March, eased 1.2 percent to a level of 116.2 from an index of 117.6 in February, and is 6 percent below March 2005.
The index is derived from pending sales of existing homes. A sale is listed as pending when the contract has been signed and the transaction has not closed; pending sales typically are finalized within a month or two of signing.
An index of 100 is equal to the average level of contract activity during 2001, the first year to be examined, and was the first of five consecutive record years for existing-home sales.
David Lereah, NAR’s chief economist, says the market has been encouraged by rising home sales over the last two months.
“Home sales rebounded from the slide that started last fall, but the pending sales data is showing a dampening effect from rising mortgage interest rates that have been trending up since January,” he says. “This means a modest slowing can be expected in the sales pace in the months ahead, although the market will hold at historically strong levels.”
Regionally, the index in the Northeast rose 5.2 percent in March to 112.9 but was 1.1 percent below March 2005. In the West, the index increased 0.7 percent in March to 111 but was 13.3 percent below a year ago. The index in the South eased 1.2 percent to 127.9 in March and was 1.6 percent lower than March 2005. The index in the Midwest fell 7.4 percent to 106.1 in March and was 9.3 percent below a year ago.
— NAR
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Home Mortgage Rates Jump in Past Week
(April 7, 2006) -- The average 30-year fixed mortgage rate jumped to 6.43 percent from 6.35 percent during the week ended April 6, according to Freddie Mac.
Interest on 15-year fixed loans edged up to 6.10 percent from 6 percent over the same period. Meanwhile, the one-year adjustable mortgage rate rose to 5.57 percent from 5.51 percent; and the five-year hybrid ARM surged to 6.11 percent from 6.02 percent.
Freddie Mac chief economist Frank Nothaft attributes the gains to economic growth and rising energy prices, which have sparked concerns about inflation.
Source: The Wall Street Journal (04/07/06)
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As Sales Slow, Rules of Real Estate Evolve
(March 28, 2006) -- Rising mortgage rates, a surge in housing inventory, and slower home sales in some areas are changing the ways in which buyers and sellers approach the housing market.
Real estate practitioners are placing a great deal of emphasis on pricing, with buyers who use the Web to conduct home searches steering clear of properties that appear to be overpriced.
Westport, Conn.-based practitioner David D'Ausilio of RE/MAX Heritage is encouraging sellers to price their homes in the bottom 25 percent of comparable dwellings and shave 3-5 percent off the asking price after three weeks if interest is tepid.
Sellers also are urged to undertake repairs to attract buyers at a time when they have plenty of homes to choose from and plenty of time to make purchase decisions.
Meanwhile, first-time buyers are encouraged to stay within their budgets because slower home-price appreciation means that there will not be a great deal of equity to bail them out in the event of a financial crisis.
Move-up buyers, by the same token, are being told to avoid offers that are contingent on the sale of their current residence if they want to secure a better price; and investors who do not want to aggressively compete with other new units for sale are being advised to rent or turn to stagers to make their properties more attractive. The housing slowdown also is impacting relocaters, as a growing number of employers require that homes be priced close to the appraised value to achieve a quick sale. Additionally, many companies are instituting "loss on sale" programs to compensate workers who get less than their asking prices.
Source: Wall Street Journal, Ruth Simon (03/28/06) Back to Top
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Mortgage Rates Highest Since 2003
(March 10, 2006) -- The national average commitment rate on a 30-year fixed-rate mortgage reached 6.37 percent this week, up from last week's average of 6.24 percent and the highest level since Sept. 5, 2003, when it was 6.44 percent, according to Freddie Mac.
The national average commitment rate for the 15-year fixed-rate mortgage also increased this week to 6.00 percent, up from last week's average of 5.89 percent. The 15-year rate has not been this high since July 5, 2002, when it averaged 6.03 percent.
The national average commitment rate, along with fees and points charged by lenders, reflects the cost of obtaining a mortgage.
The average rate on a five-year adjustable-rate mortgage (ARM) also edged up to 6.03 percent this week from last week's average of 5.97 percent.
Meanwhile, the average rate on a one-year ARM reached the highest level in five years, hitting 5.45 percent this week from last week's average of 5.34 percent. The one-year ARM has not been higher since Sept. 21, 2001, when it averaged 5.58 percent.
"Although the signs are mixed, the housing industry is now beginning to shift into slower gear, and higher mortgage rates will only strengthen that change," says says Frank Nothaft, Freddie Mac vice president and chief economist. "However, we see no signs of a bursting bubble, but rather a return to a more normal pace of activity."
— REALTOR® Magazine Online
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Mortgage Rates Inch Up This Week
( February 10, 2006) -- The national average commitment rate on a 30-year, fixed mortgage rose slightly for the third consecutive week to 6.24 percent from last week's average of 6.23 percent, according to Freddie Mac.
The national average commitment rate on a 15-year, fixed mortgage also bumped up slightly to 5.83 percent from last week's 5.81 percent.
The national average commitment rate, along with fees and points charged by lenders, reflects the cost of obtaining a mortgage.
The average rate on a five-year adjustable-rate mortgage also increased slightly to 5.89 percent this week from 5.87 percent last week, while the average rate on a one-year ARM also edged up to 5.34 percent from 5.33 percent last week.
"With no big economic news to influence the direction of mortgage rates this week, the numbers drifted very slightly upward," says Frank Nothaft, vice president and chief economist for Freddie Mac. "We see this trend continuing throughout 2006, with the 30-year [fixed-rate mortgage] ending the year at about 6.3 percent as the housing market eases back from last year's record setting levels toward a somewhat more normal rate of activity."
— REALTOR® Magazine Online
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EPA May Soon Regulate Home Renovations
( February 2, 2006) -- The U.S. Environmental Protection Agency is on the brink of instituting the first regulations governing home remodels in an attempt to minimize lead poisoning in children.
The rules would govern owner-occupied and rental dwellings built prior to 1978, when lead paint was outlawed. The U.S. Census Bureau estimates that 65 percent of homes nationwide were erected prior to the ban.
Contractors — at least one of which per project would need EPA certification in lead-safe work practices — would be required to seal off the work area and purchase special vacuums and respirators.
Mike Nagel, president of Roselle, Ill.-based Remodel One, says most contractors do nothing to reduce lead-paint dust due to the absence of stringent regulations.
According to the National Association of Home Builders, home renovations could cost 25 percent more as a result of the new rule, as builders would have to pay for training, new equipment, and additional liability insurance. Other industry representatives are concerned that the rule is too broad and unnecessary.
The first phase of implementation would involve pre-1960 rentals, pre-1960 owner-occupied homes with residents under age 6, and dwellings built from 1960 to 1978 that house a child with high blood lead levels, with all rentals and owner-occupied homes with young children built between 1960 and 1978 covered by the second phase.
Source: The Wall Street Journal, Sara Schaefer (02/02/06)
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Mortgage Rates Tumble for 6th Week
(January 20, 2006) -- The national average commitment rate on a 30-year, fixed mortgage fell to 6.10 percent from 6.15 percent over the past week, according to Freddie Mac.
This marks the sixth consecutive weekly decline and the lowest since October. The national average commitment rate, along with fees and points charged by lenders, reflects the cost of obtaining a mortgage.
The national average commitment rate on a 15-year, fixed mortgage dropped to 5.67 percent from 5.71 percent over the same time span. The average five-year hybrid adjustable rate slipped to 5.75 percent from 5.76 percent, but the average one-year ARM rose to 5.18 percent from 5.15 percent.
Freddie Mac chief economist Frank Nothaft attributed the decreases to low inflation.
Source: Tacoma News Tribune (WA) (01/20/06); Crutsinger, Martin
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Average 30-Year Mortgage Dips to 6.22%
(December 30, 2005) -- The national average commitment rate on a 30-year, fixed mortgage slipped to 6.22 percent from 6.26 percent the week before, according to Freddie Mac.
The agency reports that long-term mortgage costs fell in the latest week in response to recent government reports, including one implying that inflation is in check.
The national average commitment rate on a 15-year, fixed mortgage dropped to 5.76 percent from 5.79 percent.
Adjustable-rate mortgages were lower this week as well, with the average rate on a one-year, adjustable-rate mortgage sinking to 5.15 percent from 5.22 percent and the five-year hybrid ARM dipping to 5.79 percent from 5.82 percent.
Source: Chicago Tribune (12/30/05)
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NAR Welcomes Tougher Mortgage Guidelines
(December 21, 2005) -- The NATIONAL ASSOCIATION OF REALTORS® welcomed proposed guidelines Tuesday from five federal financial regulatory agencies on specialty mortgage products that allow consumers to defer repayment of the home mortgage principal and interest.
“The guidelines appear to be consistent with NAR's view that specialty mortgages are not appropriate for everyone. Home buyers should consult a REALTOR® to learn more about different financing options, their implications over time and what types of mortgages might work best for them,” says NAR President Thomas M. Stevens, senior vice president of NRT Inc., from Vienna, Va. “While specialty mortgage products have helped many borrowers finance the American dream of home ownership, NAR wants to help borrowers understand the risks before they take out an interest-only or payment-option adjustable-rate mortgage.”
The Federal Reserve Board, Federal Deposit Insurance Corp., National Credit Union Administration, Office of the Comptroller of the Currency, and Office of Thrift Supervision issued the proposed guidelines on non-traditional mortgages, such as interest-only mortgage loans, where borrowers pay no principal for the first few years of the loan, and payment-option adjustable-rate mortgages, where borrowers are given flexible payment options, including the potential for negative amortization.
While the agencies recognize that innovative mortgage products can benefit some consumers, they are concerned that non-traditional mortgages are being offered to sub-prime and other borrowers who may not fully understand the risks that come with these products. The five federal agencies also expressed concerns that these mortgage products present important risks that must be managed. During the public comment period, NAR will carefully assess the proposed guidelines to determine whether they are so strict that they could unduly restrict the availability of non-traditional mortgages that are good options for some borrowers, especially in high-cost areas.
REALTORS® share the agencies’ concerns about the need for consumer education. NAR teamed with the Center for Responsible Lending last summer to issue a brochure that informs home buyers about the risks and advantages of specialty mortgage products. The ”http://www.realtor.org; Shopping for a Mortgage? Do Your Homework First brochure is part of an NAR’s consumer education campaign addressing specialty loans and abusive lending practices.
Realtor Magazine Online December 21, 2005 Back to Top
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New Survey Shows Dangers of Banks Entering Real Estate
(December 2, 2005) -- A new survey by Bankrate.com—that shows banks are boosting their fees faster than the interest rates they offer customers—illustrates why banks should not be allowed to broker real estate, the president of the NATIONAL ASSOCIATION OF REALTORS® said Thursday.
“Banks have once again demonstrated their incredible ability to find ways to charge customers record fees," said NAR President Thomas M. Stevens of Vienna, Va. "Banks that once touted warm, fuzzy customer relations now are brazenly charging nearly $3 to use an ATM and more than $26 for a bounced check. Imagine what they will do to the real estate customer if they are allowed to broker real estate. Banks will control the real estate transaction end-to-end, creating virtually unlimited opportunities for extra charges and add-ons.”
The Bankrate.com survey found that:
The fee for using the "wrong" automated teller machine—one owned by a bank where you don't have an account—hit an all-time record high. You'll be hit twice for a single withdrawal—once by that other bank's ATM fee and once by your own bank, for a total average fee of $2.91.
Bankrate.com estimates that American consumers will pay more than $4.3 billion in withdrawal fees for using ATM's not owned by their own bank in 2005.
Bounced-check fees have gotten sneakier. While the average insufficient funds fee fell a few cents, from $27.13 to $26.90, Bankrate found more banks are instituting tiered fees that ramp up the more often you bounce a check or leave a check uncovered. Even at $26.90, the bounced-check fee remains the second-highest recorded since Bankrate began surveying checking accounts in 1998.
Interest-bearing checking accounts remain an unattractive option, where you have to pay a lot more to open an account and lock up a lot more money to gain a pittance in interest.
Since 2001, NAR has successfully opposed a rule promulgated by the Federal Reserve and U.S. Treasury Department that would allow federally chartered banks to enter real estate brokerage and property management. Some 250 members of the U.S. House of Representatives and 27 U.S. Senate members support the Community Choice of Real Estate Act, which would bar federally chartered banks from entering real estate.
Source: Investor's Business Daily (11/17/05)and Realtor Magazine Online
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Reverse Mortgages Popular, But There Are Risks
(November 22, 2005) -- A rising number of older homeowners who've seen their property values soar in recent years are embracing reverse mortgages as a means for financial independence.
Reverse-mortgage borrowers "range from people who are faced with trying to decide whether to spend money at the pharmacy or grocery store, on up to people who want to buy a build-it-yourself airplane kit," says Peter Bell, president of the National Reverse Mortgage Lenders Association.
However, the product does have some disadvantages, including steep closing costs, loan limits, and delays in securing the financing while the borrower waits—sometimes for weeks—to undergo mandatory loan counseling.
The National Foundation for Credit Counseling and Money Management International plan to add approximately 250 counselors to their organizations over the next several months, as they prepare to provide reverse mortgage counseling. The two groups recently received approval from the U.S. Department of Housing and Urban Development to offer the counseling service.
Source: USA Today (11/22/05); Block, Sandra and Realtor Magazine Online
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Higher Rates Dampen Refinancing Activity
(November 17, 2005) -- Home-loan applications fell for the third consecutive week as higher mortgage rates deterred homeowners from refinancing, according to a report from the Mortgage Bankers Association.
While purchase applications rose 2.6 percent, refinance requests tumbled 5.4 percent to a seven-month low. Applications fell a total of 0.6 percent.
Meanwhile, the 30-year fixed mortgage rate jumped to 6.33 percent-the highest since June 2004. The average rate on a one-year adjustable mortgage rose slightly to 5.46 percent from 5.45 percent in the previous week.
Source: Investor's Business Daily (11/17/05)and Realtor Magazine Online
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This article was published on: 11/01/2005 (REALTOR® Magazine Online)
Against the Law
Educate Yourself on Mortgage Fraud
Mortgage fraud is soaring throughout the country, but you can do something about it.
BY BLANCHE EVANS
With reports of mortgage fraud on the rise all over the country, real estate practitioners must be on guard for this white-collar crime and go out of their way to make sure they aren't involved in a fraudulent deal.
Ralph Roberts, a Warren, Mich.-based real estate broker who has created a Web site to fight mortgage fraud, says the illegal schemes that have grown more complex over the past several years and are seriously hurting the nation’s communities.
Some 721 cases of mortgage fraud are pending in the United States this year, up from 436 in 2003, according to the FBI. What can you, a real estate practitioner, do about it? You can educate yourself about the common fraud scenarios so you can identify a scheme if you encounter one.
There are more than a half-dozen mortgage fraud schemes that you should look out for, the FBI says. In its 2005 Financial Report to the Public, the FBI said these are the most prevalent:
Property flipping. Property is purchased, falsely appraised at a higher value, then quickly resold. This typically involves one or more of the following: fraudulent appraisals, doctored loan documents, and inflated buyer income. Kickbacks to buyers, real estate brokers, appraisers, and title company employees are common.
Silent second. The buyer borrows a downpayment from the seller through a nondisclosed second mortgage, which may not even be recorded. The primary lender believes the borrower has invested his or her own money.
Nominee loans/straw buyers. The identity of the borrower is concealed through the use of another person's identity for the purpose of hiding an applicant's name and credit history when applying for a loan.
Fictitious or stolen identity. May be used on a loan application.
Inflated appraisals. An appraiser acts in collusion with a borrower and provides misleading appraisals to the lender.
Foreclosure schemes. Homeowners at risk of defaulting or whose houses are already in foreclosure may be solicited to transfer the deed to their home. They do so, believing they can save their home. The perpetrator profits by re-mortgaging the property or pocketing fees paid by the homeowner.
Equity skimming. False credit reports and income documents are used to secure loans to purchase property, then the buyer signs the property over to an investor in a quitclaim deed, relinquishing rights to the property and providing no guaranty to title. The investor does not make mortgage payments and rents the property until a foreclosure suit is brought several months later.
Tips for Staying Safe From Fraud
There are many precautions you can take to make sure that you and your clients steer clear of deals involving mortgage fraud. Remember that if a deal seems too good to be true, it probably is.
Get referrals. Encourage clients to get referrals from mortgage professionals and to check the licenses of industry professionals with state regulators.
Look out for unusual promises. Be wary of unsolicited contacts and high-pressure sales tactics. A promise of extraordinary profit in a short period signals a problem.
Verify the value. Check out recent comparable sales of property in the area where you are buying, and other documents, such as tax assessments, to make sure the value of the property is not inflated.
Seek out title history. Review the title history to determine if the property has been sold multiple times within a short period, which could indicate that values were falsely inflated.
Know the loan terms. Understand terms of your mortgage and check that information against information in other loan documents.
Protect your signature. Never sign loan documents that contain blanks.
If you're aware of a mortgage fraud scheme in your market, you can contact your local FBI office and ask to speak with the white-collar crime unit.
(c) Copyright 2005 Realty Times. Reprinted with permission.
More Resources
2005 FBI Financial Report to the Public: Mortgage Fraud General Overview
FBI Needs Your Help in Fighting Mortgage Fraud (REALTOR® Magazine Online)
StopMortgageFraud.com (Mortgage Bankers Association)
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Housing Market Cooling Off and Prices are Stabilizing
The housing market in Western Massachusetts has slowed down slightly.
This may be due to the rise in interest rates, higher inventory of unsold homes or changing of the season. According to Reuters buyers "no longer bid for a house on the spot or feel compelled to bid above asking prices or plead with sellers in letters". This does not mean that the housing market is about to collapse. I believe what we are going to see in the next few months will be a different type of market. One that's more advantages for the buyer.
The seller will still be able to get appraised price (or maybe a little more) for their home. We should see prices slip a little. However because of the higher inventory of existing homes in the area, buyers are in a better position to shop around without having the sense of urgency that existed few months ago. This will also inspire investors in rental properties to purchase, which will keep the housing market from dropping too much. Housing collapse is highly unlikely for quite some time. The economy seems to be on an up swing and baby boomers are (ages 45 to 60) looking for homes to settle down. If you are a buyer, now is a good time to buy before interest rates rise any higher. If you are a seller, make sure not to over price your home. Make sure you obtain a current market analysis from a broker and/or an appraisal from a certified appraiser.
Author: Ted Rodgers (10/23/05); Mawestrealty.com
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HUD Revamps Homeownership Program
The U.S. Department of Housing and Urban Development is expanding its Good Neighbor Next Door program for police officers and teachers to include full-time firefighters and emergency medical technicians.
The program gives these service workers access to HUD foreclosures at a 50 percent discount. It aims to revitalize struggling communities by enabling municipal workers to live in close proximity to their jobs.
The agency is making other changes in the program as well, such as allowing only buyers who have neither owned other residential properties in the past year nor purchased homes through the program in the past. Borrowers must live in the properties for 36 months, and they can include closing costs in their mortgages only if funding is obtained via government loan programs.
Additionally, HUD is making only 5 percent of its foreclosures available through the program as a means of ensuring that other homeownership programs have enough properties.
Source: MarketWatch (10/7/2005); Sichelman, Lew
and Realtor Magazine Online
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Mortgage Rates Rise Across U.S.
(October 7, 2005) -- The 30-year fixed mortgage rate jumped to its highest level since the end of March, reports Freddie Mac. The rate rose to 5.98 percent this week, while interest on 15-year loans edged up to 5.54 percent from 5.48 percent last week.
The five-year hybrid adjustable rate mortgage climbed to 5.48 percent from 5.44 percent over the same time span, and the one-year ARM surged to 4.77 percent from 4.68 percent.
Freddie Mac chief economist Frank Nothaft attributes the increase to soaring energy costs and resulting concerns about inflation, noting that ongoing economic expansion will continue to drive up rates.
Source: The Wall Street Journal (10/07/05)
and Realtor Magazine Online
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