Obama’s mortgage relief program growing
The Obama administration’s $50 billion mortgage relief program is finally picking up speed after a sluggish and disappointing start: Nearly one in five eligible homeowners has been offered help so far, the Treasury Dept. said Wednesday.
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A Down Payment Anomaly Despite home buyers being advised to issue down payments of at least 20 percent, many home buyers are finding that smaller down payments result in better interest rates—but also higher payments. Rules put in place in late 2008 by Fannie Mae and similar rules adopted by Freddie Mac are less favorable to borrowers who put down 20 percent to 25 percent--partially because the GSEs consider these borrowers to be more of a credit risk since they are not required to purchase private mortgage insurance. According to Fannie Mae, borrowers benefit from this industry practice because they are able to leave themselves a financial cushion by not issuing larger down payments, and can instead save the extra money for emergencies. It is important to note though that smaller down payments mean higher monthly payments because the loan itself will be larger. ... Behind FHA Strains, a Push to Lift Housing As it tried to help shore up the ailing housing market during the past year, the Federal Housing Administration increased its exposure, particularly to mortgages in high-cost states that have also seen some of the sharpest price declines... New normal for home sales: Buyers have the power Following the downturn in the housing market, lenders started requiring more money up front, higher credit scores, proof of income, and all paperwork in order—quite different than earlier this decade when subprime mortgages were rampant and buyers purchased homes deemed unaffordable by today’s standards. For sellers, the standards are different too: Be patient and maybe lower the asking price, because the balance of power has swung strongly to buyers. Many REALTORS®, mortgage brokers, economists, and home buyers across the country say they’ve noticed a shift in attitudes that they expect will last for years. MAKING SENSE OF THE STORY FOR CONSUMERS · Traditional sellers are finding that the number of offers received is not nearly as high as those received on REO properties, which often receive multiple bids. The negotiation process also differs between traditional sellers today and traditional sellers during the height of the market. According to one REALTOR®, if a house is not being shown, then it is overpriced. The record number of foreclosed homes on the market gives buyers even more leverage. · Resulting from the credit crisis, lenders now often require much more paperwork and thoroughly review borrowers’ credit histories, bank statements, tax returns, and job histories. The average mortgage applications today starts three times thicker than what it was at the start of the housing boom, and often gets thicker as the process moves along. One mortgage broker reports that now lenders want to know everything about the buyer, “It’s a true and full underwriting process on every particular loan.” · It is not uncommon nowadays for closings to take 60 days. One reason is because of the adoption of the Home Valuation Code of Conduct (HVCC), which often results in appraisers evaluating homes in areas they are not familiar with and often using comparables that are inaccurate. This has caused delays in closing sales, and in some cases, undermining sales because appraisals are coming in too low. · Just about everyone in the real estate industry agrees that another dramatic boom-bust cycle isn’t going to happen again anytime soon. Albert Saiz, assistant real estate professor at the University of Pennsylvania ’s Wharton School , expects that new regulations and a different consumer mind-set will help real estate return to a more traditional cycle....
