Why Have Banks Really Tightened Lending Standards?

Daily Real Estate News | Monday, January 30, 2012

Home ownership affordability is at a record high due to low home prices and all-time low mortgage rates. But housing experts have blamed banks' tightened lending standards for keeping more buyers on the sidelines because they are unable to qualify for financing.

Lending standards increased sharply after the financial crisis in 2008, and even after the recession ended in 2009. Lenders have yet to ease their stricter standards, according to a report by Goldman Sachs economists Hui Shan and Jari Stehn.

Why? The researchers say it’s mostly because there’s less money available to lend.

“During the housing boom, as brokers produced a flood of new mortgages, Wall Street bankers churned out a torrent of mortgage-backed bonds for investors waiting to snap them up,” an article at MSNBC.com notes, in describing the study’s findings. “That market has all but vanished; 90 percent of new mortgages written today are backed by the government.”

Also, researchers found that lenders are swamped with more paperwork, which is also causing delays in processing. Many lenders have issued stricter documentation requirements before they’ll approve a loan. Nowadays, nearly 90 percent of mortgage applications require “full documentation” before getting approved. From 2000 to 2006, less than 60 percent of applications required “full documentation,” researchers found

Consumer Sentiment Rises in January for Fifth Monthly Gain:

A measure of consumer sentiment rose in January for the fifth straight monthly gain, according to data released Friday, as job gains helped put worries about U.S. government finances in the background.
The final January reading of the University of Michigan/Thomson Reuters gauge of consumer sentiment reached 75.0, compared to a preliminary report of 74.0 and a December reading of 69.9. The sentiment gauge, which covers how consumers view their personal finances as well as business and buying conditions, averaged about 87 in the year before the start of the most recent recession.
Recent job growth has been improving, though still well below the pace needed to bring unemployment significantly below the 8.5% rate it was last month.
Obviously, this is important to housing. As consumers feel better about the economy, the more likely they are to purchase a home.

A reprieve for unemployed borrowers

Fannie Mae and Freddie Mac recently extended their foreclosure forbearance programs to give short-term aid to unemployed homeowners, but housing counselors warn that these borrowers will need to look at longer-term solutions.
Making sense of the story

• In a forbearance program, a lender agrees not to foreclose on a property and gives the borrower several months’ grace from or reduction in monthly mortgage payments. The programs work best for temporary setbacks, like job loss, health problems, or natural disasters.
  
  
• There are drawbacks to the forbearances though. The most-significant drawback is a larger total debt from the smaller payments. The unpaid balance continues to increase during this time.
  
  
• The new temporary mortgage payment is often set to 31 percent of the household income; in some cases lenders agree to accept no payments. Fannie Mae’s extended unemployment program, first offered in the fall of 2010, limits any nonpayment or other forbearance plans to one year, with the second six months requiring approval by both Fannie Mae and the lender.
  
  
• However, even with the program in place, the lender could still report a mortgage as delinquent, which could adversely affect the borrower’s credit score.
  
  
• Because some agreements add onerous term and conditions, homeowners should also consult with a housing counselor certified by the Dept. of Housing and Urban Development.

Fed Vows to Keep Rates Low Until 2014

Daily Real Estate News | Thursday, January 26, 2012   

The Federal Reserve announced that short-term interest rates will likely stay near zero for nearly three more years, a move that is expected to spillover to long-term mortgage rates for home buyers and home owners.

In August, the Fed had made a rare move to say it would keep rates near zero until at least mid-2013. The Fed said Wednesday that the economy still needs more help and it will now extend that period to 2014.

Fed Chairman Ben Bernanke said in a news conference that the Fed isn’t happy with the modest economic recovery and that the Fed may need to take additional steps to spur recovery. He did not comment further on what those steps might be, though.

While the economy has improved somewhat in recent weeks, Fed officials say it’s worried about “strains in global financial markets” and the still high unemployment rate.

Some critics say that the Fed’s vow to keep mortgage rates longer won’t do enough to help the economy and the housing market. They argue that too many Americans are already unable to take advantage of the record low mortgage rates because of the tightening of lending standards.

Bernanke shared that concern, saying that millions of home owners were unable to refinance because of damaged credit or being from underwater in their homes.

10 Cities Where List Prices Soared in the Last Year

Daily Real Estate News | Thursday, January 26, 2012   

List prices are heating up in Florida, as recovery takes hold in the Sunshine State. Florida boasts the highest number of cities in the top 10 for largest increases in median list prices in the last year. In Miami alone, median list prices have jumped 32 percent in the last year.

Nationwide, median list prices have inched up 5.03 percent from December 2010 to December 2011, according to Realtor.com data.

The following cities are where median list prices have increased the most in the last year, based on December 2011 data of 146 metro areas from Realtor.com:

1. Miami, Fla.
Year-over-year increase: 32.50%
Median list price: $265,000

2. Naples, Fla.
Year-over-year increase: 21.67%
Median list price: $365,000
3
. Fort Myers-Cape Coral, Fla.
Year-over-year increase: 21.47%
Median list price: $229,375

4. Punta Gorda, Fla.
Year-over-year increase: 19.42%
Median list price: $179,000

5. Boise City, Idaho
Year-over-year increase: 19.25%
Median list price: $154,900

6. West Palm Beach-Boca Raton, Fla.
Year-over-year increase: 18.38%
Median list price: $219,000

7. Sarasota-Bradenton, Fla.
Year-over-year increase: 17.62%
Median list price: $241,000

8. Daytona Beach, Fla.
Year-over-year increase: 16.06%
Median list price: $179,900

9. Phoenix-Mesa, Ariz.
Year-over-year increase: 13.79%
Median list price: $165,000

10. Grand Rapids-Muskegon-Holland, Mich.
Year-over-year increase: 13.32%
Median list price: $137,000

FHA May Ease Seller Concession Cap

Daily Real Estate News | Wednesday, January 25, 2012

Many in the real estate industry were concerned that a change announced last year to the maximum seller contributions allowed for Federal Housing Administration-insured loans could cause more deals to fall apart. The FHA announced last year that it would cut seller contributions from 6 percent to 3 percent for purchases using FHA-insured loans. Seller concessions, such as seller assistance to buyers in closing costs, can play a big part in FHA-financed home sales and in closing deals, real estate agents say.

Inman News reports that the FHA may be rethinking its seller contribution cap and will likely announce changes to its policy in April.

“Rather than an across-the-board 3 percent ceiling on all FHA mortgages, the new policy would permit higher seller contributions, probably between 4 and 5 percent, on smaller loan balances,” Inman News reports. “Meanwhile, the 3 percent cap would be mandatory on all loan amounts above some yet-to-be-specified limit.”

Inman News also speculates that a dollar ceiling on seller concessions might be announced, like a maximum cap of $6,000 instead of a percentage.

"The FHA is what's keeping us alive," Steve A. Brown, executive vice president of Memphis-based Crye-Leike, told Inman News. "If they do a 3 percent across-the-board limit, that would knock out a lot of our sales. But if they go with some graduated deal tied into lower-priced homes, then we should be all right.

6 Most Stressful American Cities

Daily Real Estate News | Wednesday, January 25, 2012

Some cities are known for having more stress than others. Sperling’s Best Places recently ranked the most stressful cities in the country, taking into account such factors as unemployment, suicide rate, divorce rate, commute times, crime, mental health, and the number of cloudy days, among other factors.

Florida cities appeared the most in the top 10.

“I was shocked by the concentration of Florida cities clustered in the top ten,” Bert Sperling, lead researcher, said in a statement. “But when we look into the statistics, we can see some of the reasons,” such as high levels of divorce, suicide, unemployment, and stress from a sluggish housing market.

The following are the cities that topped Sperling’s “Most Stressful City” list for 2012, as well as a few factors contributing to the city residents’ unease.

1. Tampa-St. Petersburg-Clearwater, Fla.: A high suicide rate was among the most notable stress factors for Tampa.
Divorce rate: 12.3%
Commute time: 28.3 (minutes)
Unemployment: 11.2%
Violent crime (per 100,000 population): 500

2. Las Vegas-Paradise, Nev.: It emerges on top for highest divorce rate in the nation.
Divorce rate: 13.2%
Commute time: 27 (minutes)
Unemployment: 14%
Violent crime (per 100,000 population): 763.4

3. Miami-Miami Beach-Kendall, Fla.: The city’s stress is mostly blamed on a high number of violent crime rate and high alcohol consumption.
Divorce rate: 11.5%
Commute time: 33.2 (minutes)
Unemployment: 12.5%
Violent crime (per 100,000 population): 733.3 

4. Jacksonville, Fla.: One of the city’s top stressors is its high divorce rate.
Divorce rate: 12.3%
Commute time: 28 (minutes)
Unemployment: 10.4%
Violent crime (per 100,000 population): 557

5. Detroit-Livonia-Dearborn, Mich.: The city is in the 100-percentile in the nation for the most violent crime and property crime.
Divorce rate: 11.4%
Unemployment: 15.7%
Commute time: 27 (minutes)
Violent crime (per 100,000 population): 1111.2

6. Orlando-Kissimmee, Fla.: The city has a high number of property crimes, which contributes to its stress.
Divorce rate: 10.7%
Commute time: 29.6 (minutes)
Unemployment: 10.4%
Violent crime (per 100,000 population): 613.7