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Daily Archives: September 18, 2012
News from North Castle Recreation! | Armonk NY Realtor
6 Podcasting Tips From the Pros | Chappaqua Realtor
Real estate industry welcomes changes to FHA condo rules | Armonk Realtor
Real estate industry welcomes changes to FHA condo rules
Investor ownership limit upped, legal liabilities for HOA boards reduced
By Ken Harney, Friday, September 14, 2012.
Condominiums image via Shutterstock.
The Federal Housing Administration has finally done what it promised back in May: published revised rules that could convince condo associations across the country to get certified or re-certified for financing, thereby opening individual unit owners and sellers to low down payment, FHA-insured mortgages once again.
For condo boards, real estate agents and property managers, the long-awaited rule changes announced yesterday should prove to be "excellent news," that will "help spark home sales and help tens of thousands of condominium associations recover from the housing slump," according to the Community Associations Institute, the largest U.S. trade group in the field.
Among other changes, the rules eliminate some of the legal liability headaches that caused many condo boards to balk at FHA certifications; raise the permissible investor-ownership limit; and increase the percentage of non-residential, commercial use allowed in an FHA-certified project.
To Christopher Gardner, managing member of FHAProsLLC, a Los Angeles-based firm that assists condo boards with their applications for FHA certifications, the changes "aren’t a home run but maybe a double," but should still significantly reduce the impediments associations encountered in seeking FHA approvals.
Under federal rules, individual units in condo projects are not eligible for financing unless the entire project has passed FHA’s certification process, which looks at project budgets, reserves, forthcoming capital improvement needs, insurance policies, delinquent payments of association dues, composition of renters versus owner-occupants, and various other factors.
Industry experts welcomed the revisions to the certification form itself, which previously intimidated condo association officers because it appeared to ask them to accept broad legal liability on matters they couldn’t totally be certain about, such as disputes among tenants in the building, litigation filed with courts involving the condo project or board, compliance with local and state regulations and the like.
Though FHA attempted to reassure them that it would be rare that the government would seek the maximum penalties in cases of misinformation in applications for certification, those penalties nonetheless were daunting: up to $1 million in fines and 30 years in prison.
Now the certification form asks a single signer representing the association to attest that, to the signer’s knowledge and belief, the information in the application is accurate, has been reviewed by an attorney, and that the project complies with local and state regulations.
The signer also must warrant that he or she has no knowledge of circumstances that might have an adverse impact on the project, including construction defects, "operational issues," or legal problems. The federal penalties remain, but consultants such as Gardner say the revisions should alleviate "a lot of the fears" boards had with the previous language.
The rule changes published Thursday are "temporary" until FHA replaces them with formal, final regulations that would be preceded by proposed rules giving the industry additional opportunity to seek improvements. The new policies also represent the culmination of lengthy negotiations between FHA and industry groups, including NAR, CAI and consulting and management firms that started last spring.
At a conference held by the Northern Virginia Association of Realtors Thursday, acting FHA commissioner Carol J. Galante said the revisions show "that we listened" to the critiques from the industry, while still protecting the government’s insurance funds.
Under the previous rules, condo associations abandoned FHA in droves, even at significant costs to their own unit owners who suddenly had difficulty selling because FHA financing was no longer available to purchasers.
Only one out of 10 condo associations that would normally qualify for FHA financing currently is certified, according to Gardner, whose firm maintains a massive database of information on condos. HUD confirms that just 2,100 out of a possible 25,000 projects had obtained certifications or recertifications as of late last year.
The human costs of the previous rules were sometime extreme, Gardner says. In one case, an elderly woman who owned a unit in a non-certified community sought to obtain an FHA reverse mortgage in order to help pay the costs of her cancer treatments. The condo board said no — it didn’t want to run the certification gauntlet or take on the legal liabilities.
Among the key changes now in effect:
- The investor ownership limit in existing projects has been raised to 50 percent. Previously there was a 10 percent cap on the number of units owned by any single investment entity. Now the rule states that "any investor/entity (single or multiple owner entities) may own up to 50 percent of the total units…if at least 50 percent of the total units in the project" are owned or under contract for purchase by owner-occupants.
- The percentage of space used for commercial/non-residential purposes in a project is limited to 25 percent, but applicants can request exceptions up to 35 percent and even above in certain mixed-use developments that are still "primarily residential" in character and where the project is "free of adverse conditions to the occupants of the individual condominium units."
- Condo associations in which as many as 15 percent of unit owners are 60 days delinquent on their condo fees will now be eligible for certification. Under the previous rules, no more than 15 percent could be 30 days late. This was a major issue for many associations since they didn’t track 30-day delinquencies. Industry groups had sought a 90 day delinquency standard.
- Previous confusion over FHA requirements on fidelity bonds for management companies — with coverage that sometimes duplicated what was already maintained by the condo association itself — appears to be resolved. If the association’s fidelity bond policy names the management company as an insured or agent, it should pass muster.
Ken Harney writes an award-winning, nationally syndicated column, "The Nation’s Housing," and is the author of two books on real estate and mortgage finance.
Contact Ken Harney: Letter to the Editor
Copyright 2012 Inman NewsAll rights reserved. This article may not be used or reproduced in any manner whatsoever, in part or in whole, without written permission of Inman News. Use of this article without permission is a violation of federal copyright law.
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NAR: Tight credit could limit boost from QE3 | Mount Kisco NY Real Estate
NAR: Tight credit could limit boost from QE3
The Federal Reserve’s latest stimulus plan will have a limited impact on housing if impending rules governing mortgage credit availability result in even tighter lending standards, the National Association of Realtors said in a letter to Federal Reserve Chairman Ben Bernanke today.
On Thursday, the Fed announced a third round of “quantitative easing,” or QE3, in which it will buy $40 billion a month in mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac, and also continue to reinvest principal payments from its holdings of Fannie and Freddie debt and MBS.
The move is intended to keep downward pressure on interest rates, including mortgage rates.
NAR 2012 President Moe Veissi, writing on behalf of NAR members, expressed support for QE3 and Bernanke’s previous “ongoing admonitions that credit standards have become unreasonably tight.” He highlighted three controversial regulations — the qualified mortgage (QM), the qualified residential mortgage (QRM), and Basel III bank capital standards — that he said would further restrict mortgage lending should the rules go into effect as proposed.
“If the … rules only serve to further tighten credit, the impact of QE3 is likely to be diminished and only felt among those of substantial wealth and pristine credit. In short, those who need access to affordable credit the least,” Veissi said.
QM would establish standards for borrowers’ “ability to pay” the mortgages they seek, while QRM would establish certain baseline standards for safe underwriting and require lenders to retain a 5 percent minimum ongoing stake in any loans they originate that don’t meet QRM requirements.
The regulations are under the aegis of the Consumer Financial Protection Bureau (CFPB), which postponed action on both rules in June after protests from Realtors, builders, banks, unions and consumer groups.
Regarding the QM rule, Veissi said there was still time for the Fed to “weigh in” with the CFPB and “ensure that this rule does not serve to further tighten credit.” He specifically noted that, according to a NAR analysis, the proposal to cap debt-to-income ratios at 43 percent would exclude nearly 20 percent of today’s borrowers.
He also said that if the QM is not structured as a “safe harbor” for lenders, limiting their liability from lawsuits and regulatory challenges if they can show that they fully complied with the standards, many lenders will restrict credit even further due to litigation risk.
“Neither of these scenarios will aid in making QE3 effective,” Veissi said.
Under the QRM rule, lenders will need to retain a 5 percent minimum ongoing stake in the loans they originate unless they meet certain baseline standards for safe underwriting. As originally proposed, the rule would have forced most lenders to demand minimum 20 percent down payments and require stringent debt-to-income ratios for borrowers receiving the lowest rates and best terms.
“While this would not on its face restrict access to credit, it would clearly increase the cost of credit for a significant percentage of borrowers and likely eliminate a number of borrowers from eligibility,” Veissi said.
Basel III, bank capital standards decided by an international committee, will be phased in over six years starting in January and will force banks to hold roughly three times more basic capital than under the current Basel II accord with even higher requirements for the biggest banks, Reuters reported.
“As proposed, the rules severely disadvantage residential and commercial mortgages under most scenarios in terms of risk weighting,” Veissi said.
“It is hard not to see how this would increase the cost of mortgage credit and/or reduce access. The Fed should work to ensure that these rules take reasonable steps to reduce risk without inhibiting access to mortgage credit.”
According to NAR survey findings, released today, and an analysis of historic credit scores and loan performance, home sales could be notably higher by returning to “reasonably safe and sound” lending standards, which also would create new jobs, NAR said.
“Sensible lending standards would permit 500,000 to 700,000 additional home sales in the coming year,” said Lawrence Yun, NAR’s chief economist, in a statement.
“The economic activity created through these additional home sales would add 250,000 to 350,000 jobs in related trades and services almost immediately, and without a cost impact.”
While NAR has projected home sales will rise 8 to 10 percent this year, to about 4.6 million sales, Yun said that figure is still below the range of 5 to 5.5 million sales per year NAR considers “normal.”
The monthly survey, the Realtors Confidence Index, is based on more than 3,000 member responses. Members reported continuing tight lending conditions, lenders “taking too long” in approving applications, and lenders requiring “excessive” information from borrowers, NAR said.
Some respondents said lenders appear to be focusing only on loans to individuals with the highest credit scores, NAR added.
For instance, the survey indicated that 53 percent of loans in August went to borrowers with credit scores above 740. By comparison, between 2001 and 2004, only 41 percent of Fannie Mae-backed loans and 43 percent of Freddie Mac-backed loans had credit scores above 740, NAR said.
Similarly, for FHA loans, the average credit score for denied applications was 669 in May, up from 656 for loans actually originated in 2001, NAR said. A prime FHA loan is defined as having a FICO credit score of 660 and above.
“There is an unnecessarily high level of risk aversion among mortgage lenders and regulators, although many are sitting on large volumes of cash (that) could go a long way toward speeding our economic recovery,” Yun said.
NAR said that loan default rates have been “abnormally low” in recent years. The 12-month default rate for mortgage loans averaged just under 0.4 percent of mortgages in 2002 and 2003, which is considered a normal rate, and peaked in 2007 at 3 percent for Fannie Mae loans and 2.5 percent for Freddie Mac loans, NAR said.
Since 2009, however, Fannie Mae default rates have averaged 0.2 percent and Freddie Mac’s averaged 0.1 percent, despite high unemployment, NAR said.
via inman.com
Shrinking inventory bolstering many housing markets | North Salem NY Real Estate
Shrinking inventory bolstering many housing markets
The number of homes for sale nationwide fell 18.68 percent from a year ago in August, to 1.84 million, Realtor.com reported today, continuing a trend that’s manifested itself every month so far this year.
Year-over-year trends in median list price and median age of inventory, particularly in California, also indicated many housing markets are beginning to stabilize.
The median age of inventory was down in August (11.65 percent) from a year ago to 91 days while the national median list price was up a slight 0.5 percent from last August to $190,000. For-sale inventories declined on a year-over-year basis in August in all but two of the 146 metros Realtor.com tracks.
Annual change in listings, inventory and median list price
Data point Percent changefrom year ago 2012 August 2012 Number of listings -18.68% 1.84 million Median age of inventory (days) -11.65% 91 Median list price +0.05% $190,000 Source: Realtor.com
“We’re beginning to see the earliest signs of recovery,” said James Gaines, a research economist with the Real Estate Center at Texas A&M University, pointing to an increasing number of sales. “The market’s beginning to overcome the psychological malaise that infected it, particularly in California.”
Source: Realtor.com
While shrinking inventory is a sign of a stronger housing market, the lack of supply doesn’t necessarily correlate with strong demand, Gaines said.
Gaines said important factors keeping supply low include:
- A low (but rising) number of housing starts.
- A continued backlog of homes in foreclosure.
- A reluctance or inability of would-be sellers — some of whom may be underwater on their mortgage — to list their homes because they’re anticipating home prices will rise.
- Sales of higher-priced homes that aren’t listed for sale.
Source: Realtor.com
California was home to eight of the top 10 metros for year-over-year inventory reductions and five of the top 10 metros for year-over-year list price increases in August were. But Gaines said large drops in inventory and increases in list prices, while indicating much healthier markets than a couple of years ago, can give a deceiving picture of the strength of the recovery in California, Gaines said. The market was so down, he said, that there was no place to go but up.
Top 10 markets for annual inventory declines, August 2012
Percent change -58.35% -45.03% -43.13% -42.24% -41.75% -41.36% -41.10% -41.07% -40.15% -37.02% Source: Realtor.com
Oakland, Calif., for the sixth month in a row, has the lowest for-sale inventory of any of the 146 metros Realtor.com tracks with 3,205 listings and a minuscule median age of inventory of 20.
Leah Tounger, a Coldwell Banker Real Estate based in Oakland, says she noticed the Oakland market switched from a buyer’s one to a seller’s one sometime in March or April this year. She no longer holds two open houses for her listings, she said. One is enough. Often, buyers try to pre-empt the sale by making offers before they’re officially accepted, she said.
Tounger has sold six homes so far this year, and the last few were scooped up within 10 days and went for from five to 15 percent over list price.
On the flip side, representing buyers has been a challenge, Tounger said. One home in the nearby Berkeley, Calif., hills that she put an offer on for a client had 17 offers and eventually sold for over $300,000 above list price.
The demand for “good” inventory is high in these nation-leading turnaround markets in California. Oakland ranks No. 6 for year-over-year median list price increase (13.56 percent to $385,000) in August. San Francisco Bay Area neighbors, San Francisco and San Jose rank No. 3 and No. 4, respectively. Santa Barbara-Santa Maria-Lompoc, Calif. tops the list with a 38.96 percent increase in year-over-year median list prices to $749,000.
Top 10 metros for annual list price increases
Percent change 38.96% 25.00% 16.97% 16.10% 13.71% 13.56% 12.63% 12.51% 12.51% 12.20% Source: Realtor.com
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NAR calls for easier mortgage lending | Cross River NY Real Estate
via housingwire.com
South Salem Real Estate | Massachusetts foreclosure filings hit 2012 low
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Quick Tip: Twitter in 15 Minutes a Day | Katonah NY Real Estate
It is easy to waste a lot of time on Twitter. It’s also easy to get intimidated by everything you “think” you need to do to succeed at the platform.
"Larry" Bird – Logo courtesy of Twitter
Succeeding on Twitter is very simple: respond to messages quickly, send out interesting content, and follow new people!
So, can you get started using Twitter in just 15 minutes a day? Absolutely! Here is a simple schedule to follow:
Every AM – before you open your email:
- 1 minute: respond to tweets and DM’s
- 1 minute: scan your home feed and retweet 1 tweet
- 7 minutes: Open up 3 news sites you read & trust and find 3-4 articles to tweet out. Schedule them in HootSuite to “drip out” later in the day and next day.
Lunch:
–>
- 1 minute: respond to tweets and DM’s
- 1 minute: scan your home feed and retweet 1 tweet
End of day:
- 1 minute: respond to tweets and DM’s
- 1 minute: scan your home feed and retweet 1 tweet
- 2 minutes: Follow 10 new people
Need a crash course in Twitter 101? Watch the recording of our webinar here!
via next.inman.com
Electrolux Upbeat on U.S. Housing Recovery | Bedford NY Real Estate
via online.wsj.com