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Home Buyers—New FHA Guidelines are on their way

October 1, 2009

Washington Report: FHA News by Kenneth R. Harney   Lots of big news rumbling out of FHA, which continues to rack up record market shares of the home mortgage business. New FHA Commissioner David Stevens announced not only comprehensive changes to the agency’s appraisal rules, but also a 10 percent reduction in the amount of money senior home owners can receive from the popular reverse mortgage program. Stevens’ appraisal shakeup adopts some of the features of Fannie Mae’s and Freddie Mac’s controversial “home valuation code of conduct,” but not all. Under the new guidelines, effective this coming January 1, FHA will not accept appraisals ordered by mortgage brokers or by any member of a lender’s staff compensated on a commission basis tied to the successful completion of a loan. That’s virtually the same rule as Fannie’s and Freddie’s. But unlike the valuation code, which has encouraged many lenders to employ third-party management companies that pay appraisers low fees, FHA says it wants its appraisers to be paid fair and full fees for their work. Stevens also said that appraisers doing FHA work can include the amount of the fee they are paid on the completed appraisal report, which is available to the buyers and sellers in the transaction. Many appraisal management companies, by contrast, prohibit appraisers from revealing what they are actually being paid — to avoid upsetting consumers. Frequently appraisers working for management companies are paid $175 to $200, while the consumer is charged $400 or more. Stevens also emphasized in new instructions issued to lenders that FHA expects appraisers to have what he calls “geographic competency” — that is, they should be intimately familiar with what’s going on the local markets where they work, and they should access to all relevant data, including MLS listings and sales. That appears to be FHA’s response to widespread reports that appraisal management companies bring in appraisers from outside local markets to conduct valuations. The National Association of Realtors and the National Association of Home Builders have both bitterly criticized this practice - arguing that it leads to inaccurate appraisals that too often low-ball home values. In a bombshell announcement late last week, Stevens also said that as of October 1, the maximum proceeds available through FHA reverse mortgages will be cut by about 10 percent. That is in response to an $800 million shortfall FHA faces on its insured reverse mortgages because of declining property values. Since Congress is not likely to give the agency that amount of money anytime soon, the agency will instead have to reduce what it pays out to seniors. Published: September 28, 2009

Financial Planning—five important documents

September 23, 2009 Here’s some great advice offered by David Marotta of Marotta Asset Management

Charlottesville 1st time Home Buyers take notice…

September 11, 2009 Unless congress extends it, The $8,000 tax credit expires on 11/30/2009

A Good time to buy a home, perhaps

September 9, 2009

By JAMES B. STEWART Passing through the Fort Myers, Fla., airport a few weeks ago, I noticed people eagerly signing up for a free bus tour of foreclosed real estate—with all properties offering water views. During the ride to my hotel, the young driver volunteered that he had just bought his first house, paying $65,000 for a foreclosed property in nearby Cape Coral that last sold for over $250,000. He said he had never expected to be able to buy anything on a driver’s salary, let alone something that nice. Last week, Standard & Poor’s reported that its S&P/Case-Shiller U.S. National Home Price index of real-estate values increased this past quarter over the first quarter of 2009, the first quarter-on-quarter increase in three years. Its index of 20 major cities also rose for the three months ended June 30 over the three months ended May 31, with only hard-hit Detroit and Las Vegas experiencing declines. The week before that, the National Association of Realtors reported that sales volume of existing homes was up 7.2% in July from June. View Full Image Associated Press In short, the data suggest that real-estate prices hit a bottom some time during the second quarter, and have now begun to rise. There’s no way to be certain that this marks the end of the long, painful correction that followed the real-estate bubble, but clearly prices are no longer in free-fall. That means if you’ve been sitting on the fence, it’s time to act. Ordinarily I’d never try to time the real-estate market, but I can understand why buyers have been cautious. Few want to buy in down markets, just as stock buyers avoid bear markets. And for most people, of course, buying a house is a much bigger decision than buying a stock. But with real-estate prices nationally now down about 30% from their 2006 peak and showing signs of turning up, the prices aren’t likely to go much lower. Every real-estate market is local, and so there may be a few exceptions. Overall, though, I can’t imagine a better time to buy than now. In addition to bargain prices, buyers also should find plenty of homes to choose from. The inventory of unsold homes was 4.09 million units in July, up 7.3% from June, according to the National Association of Realtors. And mortgage rates this week were at a two-month low of close to 5%, according to Zillow. Even the stricter appraisal process is working to the advantage of buyers. Appraisals are coming in far lower than most sellers have been expecting, forcing them to face the new reality of sharply lower prices. And with stricter standards, lenders aren’t going to let buyers borrow more than they can afford, which protects buyers and helps to keep prices down. Unless you’re really prepared to accept the demands (and headaches) of being a landlord, I don’t recommend direct ownership of real estate as an investment. The days of buyers lining up to flip Miami Beach and Las Vegas condos are mercifully gone. There are much easier ways to make money in real estate, such as real-estate investment trusts or buying shares in home builders and other housing-related businesses (such as Home Depot). Historically, the mean rate of return on real estate has been around 3%, according to research from Yale economist Robert Shiller, who co-developed the Case-Shiller index. Shares in REITs and other stocks have often done much better. But there’s a good reason homeownership has been such a central part of the American dream. It delivers security, pride of ownership, a sense of community and decent investment returns as a bonus. I felt glad for my driver in Florida. He represents the other side of the foreclosure crisis. For every hardship story, and no doubt there are many, others are realizing their dreams of home ownership and getting what may well turn out to be the deals of their lives. James B. Stewart, a columnist for SmartMoney magazine and, writes weekly about his personal investing strategy. Unlike Dow Jones reporters, he may have positions in the stocks he writes about. For his past columns, see:

Are schools in Charlottesville important to you?

August 10, 2009

Here is an interesting article that was sent to me by a local loan officer, Tom Mahone. A Simple Way to Answer that All-important Question: How are the Schools? With home prices extremely affordable, low interest rates and the $8,000 tax credit for First Time Homebuyers, now is the perfect time to shop for a new home. As exciting as that is, it can be a lot of work to explore new neighborhoods, cities, and sometimes states. And much of that homework can be the research required to determine if that perfect neighborhood contains the right school district for your children. Researching schools and school districts can be a time consuming project, but it doesn’t have to be. Simply log onto to find all the answers that you need to know about any school or school district nationwide. This great site has all the statistics and information you need about local schools in your new neighborhood, to help you make decisions and ensure that your children end up in the right school. Want to know the enrollment size of the school, test scores, teacher-student ratio, English and math proficiency percentage information? No problem, the site will provide all of that information and more. And if you want to compare schools in different locations, simply select the top schools of your choice and perform a comparison. And if your upcoming move requires relocating to a new state, you can even find out statewide educational information. Enter the state you would like more information about, hit go, and receive detailed information about the educational system, including a breakdown of how students performed on state reading and math tests as well as college prep tests, and community demographics. If a move to a new school district is on the slate for your family, taking the time to do some research will help ensure the experience is a good one. Even if you’re not planning a move, this is interesting data to have on your home state anyway! And remember to forward this article on to family or friends who may be contemplating a move. They - and their kids - will thank you for it!

VHDA's Barry Merchant's Charlottesville Housing Market Podcast

August 7, 2009

An update on the Charlottesville and Central Virginia Real Estate Market

August 7, 2009 VHDA expert, Barry Merchant says in this clip that we have a way to go but there are signs that the housing market is on its way to recovery.  There are many factors that could positively or negatively impact the market but the fact that more properties went under contract in July ‘09 than in July ‘08 support what Mr. Merchant shared at the CAAR Economic Summit yesterday, 8/6.

Glimmers of light shine through the dark clouds of the Charlottesville real estate market

July 31, 2009

under contract properties outpaced June sales and were more than July of ‘08  read more:

A financial update from Suntrust Mortgage's Charlottesville office

July 19, 2009

Interesting Facts: Americans’ credit scores, the three-digit number can determine whether an applicant will get a loan and how much they will pay for it, have taken a beating.  Many Americans may not know their actual credit score, but they’ve seen enough marketing by the credit-score companies, including the Fair Isaac Corp., to know that the number, which can range from 300 to a perfect 850, has become a de facto national ID. Lenders rely on Fair Isaac’s FICO score, but so do employers when screening job candidates, insurers when issuing policies for homes and autos, and landlords when renting an apartment.  Millions of consumers’ scores have dropped; making it more expensive for them to borrow money — or even impossible if the score has sunk low enough.  Two major factors are bringing down credit scores: late payments because of the economy and credit-card companies reducing credit limits, meaning people are using a greater percentage of their available credit. Falling credit scores are a reflection of the times: plummeting home values, record foreclosures and the overall recession.  At the same time, lenders are applying stricter standards to borrower, including requiring higher credit scores.  With the increased emphasis on the collateral, you may wonder why lenders are so concerned over property appraisals for borrowers with high credit scores.  A report released last month from the Federal Reserve revealed that borrowers with good credit now make up the largest share of foreclosures.  This group includes a high percentage of upper-income borrowers.  The report shows that a 720 credit score has functioned at a level equal that of a 680 score of 2005.   For consumers, getting your credit report is easy — and free if you go to the right spot — but getting your score can be more complicated.  The three credit bureaus, Experian, Equifax and TransUnion, sell reports and scores to lenders and consumers. Also, Fair Isaac sells the bureaus’ FICO scores directly to consumers via  Under the Fair and Accurate Credit Transactions Act, consumers can get one free credit report a year from each of the three big credit bureaus. Consumers who want their credit score will need to pay a fee.  Consumer advocates recommend checking your report periodically. If you see inaccurate information, contact the credit reporting company. In The News:  Congress has enacted the Housing and Economic Recovery Act (HERA) which contains a section called the Mortgage Disclosure Improvement Act (MDIA).  In summary, MDIA impacts Truth in Lending (TIL) and many components are considered significant.  Listed below are the high level requirements that are effective with applications dated July 30, 2009 and later:  Initial TIL required on all loan types within 3 business days of application date – extended to all owner occupied loans (SunTrust has been in compliance for 9 months).  No fees can be collected (except credit report fee) prior to initial TIL disclosure received by borrower. 7 day waiting period before closing – must issue initial TIL at least 7 days before loan closing.  Significant Impact – 3 day waiting period if revised TIL required – client must have revised TIL for 3 days prior to closing.  Significant Impact – TIL must be re-disclosed if APR increases more than .125% and the 3 day waiting period also applies. Consumer waivers on the 3 day requirement are not allowed.  Last minute seller credits from a final walk through or undisclosed change orders on new construction can play a major impact on the new law.  SunTrust Mortgage fully supports these transparency initiatives and firmly believes these new regulations are consistent and complimentary to our commitment to provide our clients with a solid mortgage experience.  Market Update: “Good News” popped up several times this week.  Citing housing market gains and unexpectedly lower jobless claims, the Economic Cycle Research Institute confirmed that its leading U.S. index hit a two-year high.  ECRI director Lakshuman Achuthan said, “It is increasingly evident that, despite widespread misgivings based on backward-looking economic data, the end of the recession is at hand.”  The personal savings rate in the U.S. at the end of April 2009 was 5.7%.  Just over a year earlier the nation’s personal savings rate was 0.2%.  Initial construction of homes and building permit applications surged in June according to figures released by the Commerce Department.  Single housing starts jumped to the highest month over month increase since December 2004.  The economy is recovering, the average household has substantially higher savings, new construction is increasing. We will take that as “Good News” for the week.   Let’s go get ‘em’!! Interest Rates: On Friday July 17th your purchase client with a 740 credit score putting 20% down could secure a conventional 30-Year Fixed rate at 5.00% with 1.50 points on a 30-day lock (APR:  5.172%). FHA has established Risk Based Pricing with regards to credit scores.  Borrowers with scores 719 will have a rate improvement.   On Friday July 17th your FHA purchase client with a 660-719 credit score could secure a 30-Year Fixed rate at 5.000% with 1.50 points on a 30-day lock (APR:  5.666%).  Remember the APR on FHA includes the MI. Jumbo rates are subject to Risk Based Pricing with regards to credit scores.  Borrowers with scores 759 will have a rate improvement.  On Friday July 17th your Jumbo purchase client borrowing $1MM with a 740 credit score putting 25% down could secure a 30-Year Fixed rate at 6.000% with 1.625 points on a 30-day lock (APR: 6.170%).

What is a Short Sale? Here are some good answers and a check list

July 15, 2009

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