LAW AGAINST SHORT SALE DEFICIENCIES EXPANDED

In a major victory for REALTORS®, Governor Brown signed into law today a C.A.R.-sponsored bill, Senate Bill 458, prohibiting a deficiency after a short sale for one-to-four residential units, regardless of whether the lender is a senior or junior lienholder. Effective immediately for transactions closing escrow from this day forward, both senior and junior lienholders cannot require a borrower to owe or pay for a deficiency in a short sale. This law also prohibits any deficiency judgment to be requested or rendered for senior or junior liens after a short sale of one-to-four residential units. Any purported waiver of this rule shall be void and against public policy.

Although a lender cannot require a borrower to pay any additional compensation in exchange for a short sale approval, the new law does not prohibit a borrower from voluntarily offering a monetary contribution to a lender in hopes of obtaining a short sale. A lender is also permitted under the new law to negotiate for a contribution from someone other than the borrower, such as other lenders, agents, relatives, and the like.

Exceptions to the new law include a lender seeking damages for a borrower’s fraud or waste; a borrower that is a corporation, LLC, limited partnership, or political subdivision of the state; a lien secured by a bond as specified; a public utility lien; and additional rules apply if a note is cross-collateralized by more than one property.

Mortgage rates are great, if you qualify:

The Wall Street Journal,


Interest rates are near historic lows and home prices are affordable; however, many borrowers are finding they must have nearly pristine credit records and hefty down payments to get the best rates.

Making sense of the story

• Since 2009, credit standards have become much tighter. For borrowers, this emphasizes the importance of paying close attention to credit scores.
  
  
• New rules unveiled last week, the result of last year’s Dodd-Frank financial-services legislation, require banks and other lenders to disclose to consumers the scores used to determine interest rates charged borrowers, or to deny credit, making it easier for borrowers to see how their credit scores affect the interest rates they pay.
  
  
• The FICO credit scores on loans that banks are giving out and that are backed by government agencies Fannie Mae and Freddie Mac show the new reality. Currently, the two agencies essentially finance 75 percent of all mortgages by purchasing the loans from banks, thus shaping how much it costs to borrow.
  
  
• FICO scores range from 300 to 850. Prior to the decline in home prices, a score of 700 to 725 was considered solid and, a borrower could expect to be approved for a “conventional” mortgage at the lowest rates.
  
  
• From 2003 to 2006, 82 percent of Fannie Mae mortgages were for borrowers with a score between 700 and 750, but so far in 2011, only 13 percent of Fannie Mae mortgages carry that score, and just 1.7 percent have a score of 700 to 725. This year, 75 percent of Fannie Mae mortgages are for FICO scores of 750 to 755, up from less than 5 percent before 2005.
  
  
• These trends demonstrate the importance of understanding credit scores and ensuring credit reports are accurate. Consumers can check their credit report at AnnualCreditReport.com

Home Prices Rise Again:

CoreLogic reports a rise in home prices for the second straight month.

CoreLogic's home price index rose 0.8 percent in May from the month before, though prices were still down 7.4 percent from a year ago.

Excluding distressed sales, prices declined just 0.4 percent year-over-year. Relative strength in the non-distressed market, a slow decline in the number of homes expected to go on the market known as shadow inventory and stabilization in the amount of underwater homeowners are all positive signs, said Mark Fleming, chief economist for CoreLogic.

"Nonetheless, the fragile economic recovery is still critical to the long-term recovery in the housing market," Fleming said in a statement.

Lenders prepare for lower loan limits; stop accepting certain applications:

In anticipation of the expiration of current loan limits on Sept. 30, 2011, Bank of America has decided to stop accepting conventional and government applications for loan amounts that will exceed the permanent loan amounts. The deadline to submit loan applications was July 1.
According to an email from Bank of America, conventional loans that exceed the permanent loan limits will now be required to use non-conforming programs.

Barring Congressional action, the maximum FHA, Fannie Mae, and Freddie Mac conforming loan limit will decline to $625,500 beginning Oct. 1, 2011, from the current $729,750 limit, though the majority of counties will fall far below the $625,500 maximum. The conforming loan limit determines the maximum size of a mortgage that FHA, Fannie Mae, and Freddie Mac government-sponsored enterprises (GSEs) can buy or guarantee. Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan and require a higher down payment, increasing the monthly payment and negatively impacting housing affordability for California home buyers.

Bill proposes merger of Fannie and Freddie

Rep. Gary G. Miller (CA-42) and Rep. Carolyn McCarthy (NY-04) are expected to introduce a bill tomorrow to merge Fannie Mae and Freddie Mac, and restructure the company into a government-held corporation. The legislation will propose that the merged company purchase mortgages and sell them to investors as securities that are government-backed. The new company wouldn't operate for profit-making purposes and wouldn't have shareholders.
Under the proposal, a five-member board would govern the corporation, and it would be regulated by the Federal Housing Finance Agency, which would ensure that its market share didn't exceed 50 percent of the mortgage market.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -172 basis points last week which helped to move mortgage rates much higher from last Friday to the prior Friday. Traders dumped MBS and Treasuries as the massive Quantitative Easing (QE II) program ended which removed the single largest purchaser of U.S. Treasuries from the market place. MBS also sold off on the much stronger than expected economic news. We saw some good growth in the Chicago PMI and the ISM Manufacturing data, both measure true economic expansion by monitoring our manufacturing sector. We also got a very nice surprise with the Pending Home Sales data.

Pending Home Sales Surge Ahead:

Rebound in May, Up 8.2%

The National Association of Realtors' Pending Home Sales Index increased 8.2 percent to 88.8, bouncing back from April's seven-month low. Pending homes sales lead existing homes sales by a month or two.

Economists had expected home resale contracts to rise only 3.8 percent after a previously reported 11.6 percent drop. Pending home sales increased in all four regions, with the Midwest and West notching double-digit gains.

In the 12 months to May, pending home sales rose 13.4 percent