Category Archives: Pound Ridge

Stiglitz: Obama, Romney still need to address housing market | South Salem Realtor

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Stiglitz: Obama, Romney still need to address housing market

Columbia University Professor Joseph Stiglitz speaks during The Economist's Buttonwood Gathering in New York October 24, 2012. REUTERS/Carlo Allegri

Columbia University Professor Joseph Stiglitz speaks during The Economist’s Buttonwood Gathering in New York October 24, 2012.

Nobel Prize-winning economist Joseph Stiglitz chided U.S. President Barack Obama and Republican presidential candidate Mitt Romney for not seriously addressing the troubled U.S. housing market during the recent series of presidential debates.

The Columbia University economics professor said in an interview with Reuters TV that the two men have shied away from discussing the uneven U.S. housing market recovery because neither has concrete solutions for helping financially strapped homeowners and both are wary of offending the banks.

“I find that shocking” that neither has talked about housing market issues, Stiglitz told Reuters. “It is one of the things that precipitated the crisis. In some sense, they don’t want to offend the banks … . The banks have been a major problem to doing something about the problem.”

Stiglitz, who won the Nobel Prize for economics in 2001, spoke less than two weeks before what could be one of the closest presidential elections in U.S. history.

Romney was 1 percentage point ahead of Obama in Wednesday’s Reuters/Ipsos daily tracking poll in a race that is effectively a dead heat ahead of the November 6 vote.

The biggest weak spot in the domestic economy continues to be the housing market, despite signs of life in cities like Las Vegas, Phoenix and Miami – some of the hardest-hit areas during the financial crisis.

Miami home prices rose again in September, marking 10 consecutive months of appreciation, according to the 26,000-member MIAMI Association of REALTORS.

But there are many skeptics about how solid the recovery is and whether some uptick in home building has been the result of the Federal Reserve’s recent action to buy mortgage securities to reduce borrowing costs.

On Wednesday the Mortgage Bankers Association reported that last week, applications for new mortgages in the United States registered their biggest percentage decline in a year as rates for a 30-year mortgage rose 6 basis points to an average of 3.63 percent, the highest in a month.

SHRINKING MORTGAGE DEBT

The country is still way off from its long-term average rates in construction, housing sales and foreclosures.

About 3.8 million homes have been foreclosed on since the financial crisis began in 2008, according to CoreLogic, which also reports another 1.3 million homes are in some stage of foreclosure.

Stiglitz said any meaningful discussion about housing must include a plan for reducing the level of mortgage debt held by U.S. homeowners, given how far property values dropped during the crisis.

“As soon as you start talking about mortgages and the housing problem, both sides feel uncomfortable,” Stiglitz said.

“Obama hasn’t done enough and Romney has no real proposals,” and yet both candidates have raked in millions of dollars from the banks in campaign contributions, he said.

Stiglitz is not the only economist who argues that reducing mortgage debt is the surest way to boost the economy by providing financial relief to struggling homeowners.

The Financial Times reported on Wednesday that if Obama is re-elected, he will push to oust Edward DeMarco, the acting head of the Federal Housing Finance Agency, who has opposed using principal reductions to reduce debt obligations on mortgages guaranteed by Fannie Mae and Freddie Mac.

The FHFA is the chief regulator of the two government-sponsored mortgage finance firms.

Others have promoted even more controversial measures to fix the housing market, like giving local governments the power to seize distressed mortgages through eminent domain so they can be restructured to enable homeowners to remain in their residences.

The idea of using eminent domain, which has been vigorously opposed by Wall Street bond investors, is being considered by San Bernardino County in California and a handful of other communities across the country.

Stiglitz said there are some good ideas about the restructuring of mortgages but neither candidate is addressing them.

One way or the other, the candidates could consider reduction in mortgage principal but “the banks don’t want to do it because they would be forced to recognize losses.”

via reuters.com

Canada’s Hot Housing Market Chills in September as Prices Drop | Pound Ridge Realtor

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Canadian home prices in September fell the most in nearly two years, suggesting that recent changes to the country’s mortgage rules have reined in Canada’s once-hot housing market.

Canadian home prices cooled in September, according to the Teranet-National Bank Composite House Price Index.

The Teranet-National Bank Composite House Price Index, or HPI,  fell 0.35% in September from August, with price drops observed in six of the 11 major Canadian cities watched by the index, including British Columbia’s Vancouver and Victoria markets, as well as Montreal.

That’s the largest price decline seen by the HPI since November 2010, when the  index fell 0.39%. Since then, the HPI has only seen four monthly declines, as historically low interest rates have spurred spending in Canada’s housing sector.

On an annualized basis, the HPI gained 3.6% in September, a slight drop from the previous month.

The federal government’s new rules that reduced the maximum amortization period of new government-insured mortgages from 30 to 25 years has “undoubtedly” contributed to cool the market, said National Bank Financial senior economist Marc Pinsonneault.

Still, existing home sales in Canada jumped 2.5% in September from August, according to the Canadian Real Estate Association, igniting worries that the sector may be headed for a crash landing.

Those concerns should be tempered as prices are likely to steadily drop up to 5% by the end of next year, said Mr. Pinsonneault.

“It doesn’t mean a catastrophe, but it’s consistent with a soft landing in the sector,” he said.

The sector will continued to be closely monitored by the Bank of Canada, which is concerned that the state of household debt in Canada is worse than originially perceived, said Mazen Issa, Canada macro strategist at TD Securities. The ratio of household credit-market debt to disposable income hit a record high of 163.4% in the second quarter of 2012.

via blogs.wsj.com

North Salem NY Real Estate | Mortgage applications down 12%, rates edge up

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The number of mortgage applications filed by potential homebuyers and refinancing borrowers fell 12% for the week ending October 19, an industry trade group said.

The steep drop is attributed to an upward adjustment made a week earlier to account for the Columbus Day holiday, according to the Mortgage Bankers Association. When reviewing the numbers on an unadjusted basis, applications fell 2%.

The MBA noted that refinancing activity declined 13% from the previous week while home purchase applications fell 8%. The trend of slowdowns is expected to continue.

The MBA is warning it expects to see $1.3 trillion in mortgage originations during 2013. This is down more than 25% from its revised estimation of $1.7 trillion in 2012.

As applications declined, rates went up with the average 30-year, fixed-rate mortgage on a conforming loan increasing to 3.63% from 3.57%.

The 30-year jumbo FRM also grew to 3.85% from 3.81% last week.

The 30-year, FRM backed by FHA edged up to 3.41% from 3.34%, while the average 15-year, FRM hit 2.96% from 2.87% last week.

The 5/1 ARM also grew to 2.72% from 2.59%.

via housingwire.com

Top reasons to opt for seller financing | South Salem NY Realtor

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The son of a longtime friend recently caught me at a Friday night high-school game and informed me he and his wife had turned down an older home in the neighborhood they always wanted, for a new home in a subdivision.

They also declined the possibility of no-cost seller financing from the owner of the older home because the builder offered a slightly lower rate on the new home.

“We just felt like we wouldn’t have to do anything on the home for years,” Patrick said. “We couldn’t afford any expensive surprises.”

While I disagreed with him on both topics, I kept my opinions to myself because he had already made his decision and was looking forward to moving into his new home. Here’s why I would have chosen differently.

First and foremost, you can always repair or remodel a home, but you can never single-handedly fix a neighborhood. If you know the schools, churches and streets that are important to you, it’s usually best to buy where you have done your primary research. And, new homeowners often underestimate upkeep.

But just as important are the credit and cash needed to get a loan today. Lenders are being more cautious and are demanding more skin in the game.

Recently, Fair Isaac Co., the developer of FICO scores, revealed that 78.5 percent of all consumers have scores that fall between 300 and 749. The FICO score ranges from 300 to 850. So only about one in five American have a FICO score of 750 or higher.

Ellie Mae Inc., a provider of mortgage origination software to lenders, reports that borrowers approved for mortgages in September had an average FICO score of 750. What message does that send to prospective homebuyers?

Besides high credit scores, borrowers are coming in with higher down payments to satisfy lender requirements. According to Ellie Mae, homebuyers who used a Fannie or Freddie loan had, on average, a 21 percent down payment. Homeowners who refinanced had average equity in their homes of 30 percent.

Doug Duncan, Fannie Mae’s chief economist, recently said he thought that loan standards will eventually ease as banks reduce some extra risk-based fees that they have added to benchmark quotes since the mortgage meltdown.

But is there a viable plan B? What if you didn’t have to go to a lender for a home loan?

Seller financing is an underestimated benefit not only because of today’s increased lender scrutiny, but also because the buyer dodges most all the fees associated with the loan. For example, in Patrick’s case, he decided on a 3.5 percent loan from a lender rather than a 4 percent loan from the homeowner.

Let’s say the total costs of a $200,000 loan come to 2 percent of the loan amount, or $4,000. The monthly difference between a 3.5 percent loan and 4 percent loan is approximately $57 a month. Not only would Patrick have to borrow more or come out of pocket with the extra funds (in addition to the down payment needed on the house), but he would also need more than seven years to make up the monthly difference.

While many owners make “cash-out, conventional” financing a requirement when selling a home, others are more than willing to negotiate price and terms. Homes are selling quickly in many neighborhoods, but others continue to sit. It’s those owners who can be “all ears” if it means closing a deal and moving on with their lives.

And, some sellers, particularly seniors with no high-rate place to park their cash, are not opposed to accepting a healthy down payment and “carrying the paper” on their real estate as long as they are guaranteed 4 percent interest on their money. In most cases, it’s difficult to get that rate in non-risk accounts.

Buyers and sellers can build in safety features to make carrying the paper palatable for both sides. If you are a buyer, there’s no harm in asking. You could save time, anxiety and a lot of cash — an inexpensive surprise.

via inman.com

Must I compensate my agent if I don’t buy? | Pound Ridge NY Homes

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DEAR BENNY: Could you advise me of the appropriate (and legal) way to compensate the buyer’s agent we used for our unsuccessful house hunt?

After a stressful summer spent engaged in multiple bidding wars and a short sale that fell through due to a surprise judgment, we’re taking a break. We are happy with our agent’s performance, and we plan to utilize her services in the future.

Should I offer a simple thank-you note and reassurance that we will recommend her to family and friends, or do we owe her cash for real estate services rendered? Does she or her brokerage keep the money we placed in escrow for the short sale? –Lisa

DEAR LISA: Yours is an interesting question. I know a lot of real estate agents and brokers read my column so I welcome input from out there.

Did you sign an agreement with the agent? Presumably you did, because to my knowledge most states require agents and brokers to enter into a written agreement with a potential client before any actual work is done. Read that agreement carefully; it may obligate you to pay, even if you did not buy a house.

I would ask the agent directly: “We are very pleased and will use your services when we resume our search. We would like to give you a little gift; do you have to share it with your brokerage firm?”

One suggestion: Give her a gift card for a dinner for two at a nice restaurant or at an upscale clothing store. I think such a gesture plus a nice thank-you card would be appreciated and appropriate.

Since the agent did actually do work on your behalf, I am not concerned about anyone claiming this will be a “kickback” in violation of the Real Estate Settlement Procedures Act (RESPA). It is only when money is given for no services that RESPA can kick in.

I welcome any and all suggestions on this question.

DEAR BENNY: I refinanced in January (3.85 percent) and a friend advised me to inquire about a “direct reduction loan schedule.” He tells me it is a method to pay down principal significantly faster than overpaying the monthly installment. I have asked my mortgage banker about this, but so far no response. Can you clarify if there is such a thing and explain how it works? –Jim

DEAR JIM: Many lenders (but apparently not all) have a biweekly payment arrangement, whereby you make two payments a month instead of just one. The net result is that your principal balance is reduced every two weeks, thereby requiring you to pay less mortgage interest in the long run as well as paying off the loan faster.

My understanding is that lenders have to create a new computer program payment schedule, and not all lenders are prepared, or even willing, to do this.

Of course, you could add a little extra to your monthly payment and basically pay off the loan early. If you do this, however, make sure that each check you send in (and the coupon that accompanies the payment) specifically states “extra principal in the amount of $XXX.” If you are making a direct, automatic bank payment, make sure your lender understands this and properly credits the additional payment to principal.

DEAR BENNY: My husband and I are separated, but we own a condo together. I live in the condo and have paid all the costs, mortgage, taxes, upkeep and homeowners association (HOA) fees. Our incomes are separate. I want to pay off the condo, thus owing only taxes and HOA fees. My income is very low and the lower I can keep my monthly costs the better.

I’m 65 and eligible for a tax break on the condo, but I will get only half the amount because it is jointly owned. I was unable to purchase on my own because of my small income. I want the full tax break, so do I pay off the condo, thus clearing the deed? At that point, how can the property be in my name only so I can have only my name on the relevant documents and then apply for the full tax break? –Sally

DEAR SALLY: You are facing a dilemma that many divorced couples encounter: how to take title in your name. Unfortunately, in my experience, the only way is to refinance the existing loan, but in your name only. That means that you will have to have sufficient credit to qualify for the new loan.

Do you have any relatives or friends who can assist you? Your ex can (should he decide to be agreeable) convey his interest in the property to you, but he will still be legally obligated on the existing mortgage.

There may be some state or local government programs in your area that will assist low-income homeowners obtain a mortgage. You should contact your local state representative or senator for additional information. They have been elected by you and should be responsive.

DEAR BENNY: I inherited a house from a friend who passed away six months ago. I have not yet taken title to the property and will not until the estate’s trustee finishes settling the estate, which will be in about a month. The mortgage is currently being paid from the interest generated in a CD account.

Once the trustee finishes her duties, the trust provides that the money remaining in this account be used to pay down the mortgage. Once the title is transferred to me, can I take over the home’s mortgage until I can get refinancing with a different lender?

I know that if I were a relative, I would have protection, but because I am not, I am worried that the mortgage company will call in the loan.

The loan has a prepayment penalty, which the mortgage company says it will waive for a short period of time (for the paydown), although it has not put this in writing. The prepayment penalty expires in six to seven months and would have been applicable, prior to expiration, even if the house was sold, although there were no stipulations regarding death of the borrower.

Ideally, I’d like to have the paydown and the refinancing happen at the same time; however, I have heard from a lender that my name must be on the title for six months before I can seek to refinance. Any suggestions on how to proceed? –Donna

DEAR DONNA: While state law will differ, my experience is that typically in probate situations, the personal representative is required to pay off all outstanding debts of the deceased, including the mortgage.

However, since you want the house, you will have to pay off the mortgage with your own funds over and above what is available from the trust.

I did not know the answer to your financing question so I discussed it with a friend who is in the mortgage business. He advised me that it is his understanding (perhaps misunderstanding) that the six months refers only to situations where a borrower wants cash out from the financing.

So I recommend that you consider shopping around for another lender who makes it clear that his bank really wants to lend money.

via inman.com

Credit Unions Move in on Mortgages | Pound Ridge NY Real Estate

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While full service banks and other traditional mortgage lenders have watched their mortgage businesses decline in recent years, credit unions have doubled their market share since 2009 and originated 8 percent of all mortgages in the second half of 2012.

Through the first half of the year, credit unions originated $56.3 billion in first mortgages and captured 7.6 percent of the market. They held 7.8 percent of those mortgages on their books and sold slightly more than half to secondary markets for asset-liability management purposes. Fixed-rate first mortgages comprised 14.6 percent of the asset base for credit unions, a slight increase from the 14.4 percent posted in the first quarter but down from the 14.7 percent posted during second quarter 2011, according to creditunions.com.

Credit unions also posted a 17 percent increase in consumer loan originations over 2011 levels, disbursing $85.5 billion in non-mortgage, non-business loans to members. The industry posted strong growth in used auto, new auto, and credit card loans, with new auto loans increasing 0.7 percent from June 2011 levels.

Industry sources cite service, speed and lower closing costs as advantages credit unions enjoy over other lenders.  Closings are generally 30 days faster and credit unions are exempt from state intangible taxes, which can save a borrower several hundred dollars at closing, though a New York Court of Appeals ruled recently that mortgages issued by federal credit unions are subject to the state’s mortgage recording tax.  Also, credit unions retain a larger percentage of the mortgages they originate, which means that members will only have one financial institution to make their mortgage payment and not have to worry about making a payment to another bank if the loan were sold.

From the mid-1990s until the mid-2000s, credit unions were a tiny fraction of the mortgage business, accounting for just 2 percent of the first-mortgage market, according to the Credit Union National Association, a trade group. But in 2008-09, that rose to 4.5 percent.  Before the first quarter of this year, 5 percent was the highest market share of mortgages credit unions had achieved during a three month period.

The growth in credit union mortgages surprises even industry leaders.  Back in 2006, the Credit Union Housing Roundtable, a group of strategists in credit union housing finance, set a goal of reaching the 10 percent share threshold by 2016. That goal now looks like it might be reached two or three years early and an industry consultant, Callahan and Associates, has upped it to 20 percent by 2020.

What makes the growth even more remarkable is that only about 17 percent of the nation’s 7300 credit unions write the vast majority of credit union mortgages.

To help smaller credit unions that may lack the expertise, personnel or capital to originate mortgages, several Credit Union Service Organizations have gone into business to pool resources and provide mortgage origination services  to help smaller credit unions make mortgage loans.

Industry leaders are also exploring ways to access additional capital for mortgage lending by developing investment vehicles to bring credit union issued mortgages to capital markets   Finding sources of funds in the capital markets that are an alternative to the GSEs will help them find new sources of housing finance in the face of continued uncertainty about the GSEs and provide them a way of financing mortgages that might not conform to GSE guidelines.

via realestateeconomywatch.com

Governor Cuomo: Fracking Will Support 1.7 Million Jobs, Study Shows | Pound Ridge Realtor

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Drilling for oil and natural gas in shale rock is supporting 1.7 million U.S. jobs this year, including workers outside the energy industry such as waiters and shop clerks, according to researcher IHS Global Insight.

Job tied to unconventional oil and gas production will reach 3.5 million by 2035, according to the report backed by the industry and released today. Because U.S. unemployment is high, many finding jobs related to drilling otherwise would be unemployed, said John Larson, a vice president at IHS and the study’s lead author.

The IHS report was funded by groups such as the American Petroleum Institute and the Natural Gas Supply Association. In January, President Barack Obama cited an earlier IHS study that predicted drilling for shale gas alone would create more than 600,000 jobs by the end of the decade.

“We look at this in the near term, and we believe that many of these jobs really are net new jobs because these individuals would not be able to find employment elsewhere,” Larson said on a conference call. “These jobs tend to be higher paying.”

Shale oil and gas is freed by hydraulic fracturing, or fracking, in which millions of gallons of chemically treated water and sand are forced underground to shatter rock and allow the fuel to flow. Critics have cited potential risks to ground water and air quality. The U.S. Environmental Protection Agency is conducting a study of the impacts of fracking on water.

Rigs, Pipes

About 80 percent of jobs will be on rigs or at companies supplying drillers, such as pipe manufacturers. The rest will be “induced” jobs in other businesses, such as restaurants, hotels and shops. This year, the drilling industry will support about 360,000 direct jobs, 537,000 jobs in supplying industries and more than 850,000 jobs outside the industry, according to the report.

The forecasts assume current regulations on fracking will remain unchanged, according to the report.

Job growth among oil producers reflects capital costs to tap into shale rock. From this year until 2035, more than $5.1 trillion will be invested to produce unconventional oil and gas, according to the report.

Federal, state and local taxes will increase more than $111 billion in 2020 from $62 billion this year.

“We’re talking about what we perceive as a game changer in energy production for the United States,” Larson said. “It’s a really rapid rise and a dramatic shift.”

Doubling Demand

Forecasts in the report are based on IHS projections of oil and gas production. The report assumes demand for natural gas to generate electricity will more than double from now through 2035, and that U.S. exports of natural gas will reach about 4.3 billion cubic feet a day by 2020.

“We have a very, very detailed, bottom-up, build on a play-by-play basis around all this activity,” Larson said. “What you’re seeing here does not represent all resources. It only represents those resources brought to market as a commercially viable productive frontier given the market prices that we see.”

In his January State of the Union address, Obama said fracking could support more than 600,000 jobs by the end of the decade. Larson said he was “comfortable with the accuracy” of that forecast based on state and national employment data.

via bloomberg.com

North Salem, Lewisboro, Katonah Inventory | North Salem NY Real Estate

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Months of Unsold Inventory in Northern Westchester

North Salem    19 months

Lewisboro        11 months

Katonah           8 months

via trulia.com