Archive for the ‘Mortgage’ Category
Today, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged within in its current target range of 0.000-0.250 percent.
In its press release, the FOMC noted that, since March, the U.S. economy “has continued to strengthen” and that the jobs markets “is beginning to improve”. This is a step up from the last meeting after which the Fed said jobs were “stabilizing”.
It also reiterated that business spending “has risen significantly”.
Today’s statement marks the 7th straight press release in which the Federal Reserve shows optimism for the U.S. economy. Furthermore, the Fed has now closed all but one of the programs it created to support markets during last year’s financial crisis.
Threats remain to growth, however. The Fed fingered a few:
- Employers are reluctant to hire new workers
- High unemployment threatens consumer spending
- Consumer credit (still) remains tight
Also in its statement, the Federal Reserve re-acknowledged its plan to hold the Fed Funds Rate near zero percent “for an extended period”. This was expected.
Overall, the statement’s tone was positive and the Fed noted that inflation is within tolerance.
Mortgage market reaction has been muted thus far. Mortgage rates in Mill Valley are unchanged post-FOMC.
The FOMC’s next scheduled meeting is a 2-day affair, June 22-23, 2010. The 55-day span between meetings will be the FOMC’s longest of 2010.
The sales of newly-built homes soared in March. Even more than what was expected. But the news may not be as glowing as what the media is telling us.
Take a look at the headlines from last Friday:
- Sales of new homes rocketed up 27 percent in March (WaPo)
- New-home sales rise fastest in 47 years (CNNMoney)
- Sales of New Homes Climb by Most Since 1963 (Business Week)
None of these statements is false, per se, but each is somewhat misleading. The biggest reason why March’s New Home Sales was even able to rise 27 percent is because data from the month before it — February — was the worst in New Home Sales history.
In February, new homes sold posted its lowest level in recorded history.
A better comparison would be against March a year earlier; or October 2009, the month before the home buyer tax credit’s initial expiration date.
Against both of those time periods, March 2010 fared well.
Home buyers – first-timers and repeats alike — went under contract last month, taking advantage of the soon-to-expire federal home buyer tax credit program. The credit gives up to $8,000 for first-time buyers and up to $6,500 for repeat ones.
Buyers must be in mutual contract on or before April 30, 2010 to be eligible for the credit, and must closed on or before June 30, 2010.
The New Home Sales data included other strong housing data, too. The current supply of new homes nationwide is at a multi-year low. Along with stronger home demand, this should push home prices nationwide higher throughout the coming months.
New home sales don’t have a big impact on the local Marin real estate market but headlines and news do impact over all consumer confidence in the housing market.
California homeowners who have had debt forgiven via a short sale, foreclosure or loan modification won’t have to pay taxes on the forgiven debt. SB 401 recently signed by Governor Schwarzenegger provides a state tax exemption to homeowners on debt forgiven in a short sale, foreclosure, or loan modification. Federal laws already protect homeowners from owing federal taxes on forgiven debt.
The tax relief applies to forgiven debts in the tax years 2009-2012. It applies to owner-occupants with a qualified principal resident. The relief includes both first and second mortgages and includes refinance loans to the extent the funds were used to payoff a previous loan that would have qualified under these guidelines. Second home owners or rental property owners do not qualify in most circumstances.
The California Tax Franchise Board expects the tax relief will impact nearly 100,000 California residents.
To find out if you qualify, contact your tax adviser.
If you are first time home buyer considering moving to Marin County, now may be a great time to look at a home purchase. For a small window, home buyers may be able to qualify for both the Federal tax credit and the California tax credit, which could equal $18,000 for some home buyers.
The California Tax Credit
Governor Schwarzenegger extended the tax credit (AB 183) for home buyers in the state of California, providing $200 million for home buyer tax credits. The bill allocates $100 million for qualified first-time home buyers and $100 million for home buyers purchasing new construction.
Key Provisions of the California tax credit:
- tax credit is equal to the lesser of 5 percent of the purchase price or $10,000
- taken in equal installments over three consecutive years
- purchasers will be required to live in the home as their principal residence for at least two years or forfeit the credit (i.e. repay it to the state).
- Must close escrow between May 1, 2010 and December 31,2010 OR be in contract by December 31,2010 and close before August 1, 2011
The Federal Tax Credit
The federal tax credit is available to both first time homebuyers and “step-up” buyers who have owned their current homes for 5 of the last 8 years.
Key Provisions of the Federal tax credit:
- tax credit is equal tof 10% of purchase price ($80,000 purchase = $8,000) to a MAXIMUM of $8,000
- if buyer has income taxes less than $8,000, the Federal govenment will ‘refund’ the difference to the buyer/taxpayer
(if the taxpayer owes $2,000 in taxes at year end; tax credit = $8,000; taxpayer/buyer will receive $6,000 refund) - must be in contract by April 30, 2010 and must close by June 30, 2010
A first time home buyer who gets into contract before April 30, 2010 and closes escrow between May 1, 2010 and June 30, 2010 may be eligible for both credits. With a significant inventory of homes available for sale in Marin, home buyers who move quickly may benefit.
As expected, Existing Home Sales fell in February, slipping 30,000 units versus January’s numbers. It’s the 4th straight month in which Existing Home Sales were lower, month-over-month.
An “existing” home is one that is previously owned and lived-in (i.e. not new construction).
Existing Home Sales peaked in November 2009, just as the First-Time Home Buyer Tax Credit was set to expire. Immediately thereafter, according to the National Association of Realtors®, monthly sales plunged 17 percent in December, then another 7 percent in January.
Comparatively, February’s dip is a modest 0.6 percent and is more in line with the pre-tax-credit Existing Home Sales trend. The real estate market is rediscovering its normal.
But “normal” may not last for long.
When the federal home buyer’s tax program was extended last year, the new rules stated that home buyers must be under contract for their new, respective homes on, or before, April 30, 2010 in order to claim up to $8,000 in federal money. That deadline is approaching and many markets –parts of Marin included — are experiencing a surge in buyer traffic as April 30 nears.
The Existing Home Sales data doesn’t reflect this new demand, nor the number of new contracts written. It only accounts for home closings and, in February, closings were down.
For today’s buyers, the market looks favorable. The federal tax credit is in place, mortgage rates stubbornly stick near all-time lows, and home prices are staying in check.
Existing Home Sales should gain through March and April, theoretically pressuring home prices higher. Consider acting sooner rather than later as interest rates are also expected to rise later this spring.
Foreclosure Radar released the February 2010 California Foreclosure Report today. The report had some interesting data. Highlights of the report:
- Notice of Default’s were up 20% in February after 4 months of declines. This is to be expected based on rise in delinquencies. Despite the increase, they are down year over year almost 40%
- Foreclosures are down. There was a 14.34% decrease in the number of properties going back to the bank at the courthouse steps. The number of foreclosures going to 3rd party investors at the court house steps was also down 2.72%. These numbers are very low based on the number of delinquencies.
- Foreclosure cancellations remains flat because loan modifications are not happening- “hamp has failed”.
- Bank owned inventory (REO’s) are up even with foreclosures down because resales are slow
Check out the full report below:
Today, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged, in its target range of 0.000-0.250 percent.
In its press release, the FOMC noted that the U.S. economy “has continued to strengthen” and that the jobs markets “is stabilizing”. It also said that business spending has “has risen significantly”.
This is a slight departure from the Fed’s January statement in which housing was not mentioned and business spending was said to be “picking up”.
It’s also the sixth straight statement from the FOMC in which the Fed described the economy with optimism. This is a signal to markets that 2008-2009 recession is over and that economic growth is returning.
The economy is not without threats, however, and the Fed identified several:
- High unemployment threatens consumer spending
- Housing starts are at a “depressed level”
- Consumer credit remains tight
The message’s overall tone, however, remained positive and inflation is within tolerance limits
Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period” and to end its $1.25 trillion commitment to the mortgage market by March 31, 2010. Fed insiders estimate that the bond-buying program lowered mortgage rates by 1 percent since its start.
Mortgage market reaction to the Fed press release is, in general, ambivalent. Mortgage rates in Marin are unchanged this afternoon.
The FOMC’s next scheduled meeting is a 2-day affair, April 27-28, 2010.
Foreclosures happen for many reasons and it is something no homeowner wants to experience. There are many resources available to homeowners concerned about or in jeopardy of being foreclosed upon. I have a series on this site with loan modification tips. Unfortunately, we are hearing about many instances where homes are being foreclosed on while the homeowner is in the process of the loan modification. We are also seeing many new short sale listings coming up after failed loan modifications. We have a new series coming up on the short sales in Marin, stay tuned for that. In the meantime, we thought it would helpful to have tips and resources for homeowners who need assistance and information to avoid foreclosure.
CREDIT COUNSELING SERVICES- HUD approved, non-profit counseling service, offers assistance with debt management, budgeting, credit report review, housing education and financial planning.
The California Association of REALTORS provides this list of online resources:
FORECLOSURE AVOIDANCE TOOLS
- Foreclosure Prevention Resource Center
- National Association of REALTORS Foreclosure Avoidance Brochure
- Fannie Mae – Act Now to Avoid Foreclosure
- FHA Avoiding Foreclosure
- HUD Tips for Avoiding Foreclosure
Troubled homeowners waiting on loan modifications are getting help from the Obama administration. 25 lenders who signed up for the Making Home Affordable program were urged to move faster to help homeowners.
According to the California Association of REALTORS®, the letter sent to the chief executives of these 25 institutions said: “We are asking that all servicers expand servicing capacity and improve the execution quality of loan modifications in order to help the sizable number of homeowners at risk of foreclosure and eligible for the program.”
By August 4, the Obama adminstation wil be issuing monthly reports on lenders’ performance including information on how many loan modifications have been implemented.
For more information about getting a loan modification, check out my series:
Loan Modification 101-the Basics
- Part 1- Loan Modification 101 – How to start the loan modification process
- Part 2- Loan Modification 101 – Doing your homework
- Part 3- Loan Modification 101 – Determining if you qualify for a loan modification
- Part 4- Loan Modification 101 – Tips for qualifying for a loan modification
- Part 5- Loan Modification 101 – Negotiating new loan terms
- Part 6- Loan Modification 101 – Finalizing your loan modification
Did you know that a strong credit score is still one of the leading factors lenders use in determining whether or not to issue a consumer credit? Staying on top of your credit score to make sure there are no inaccuracies or errors is important for consumers even if you aren’t anticipating taking out a loan anytime soon.
Free Credit Reports
You can receive a free copy of your credit report once a year at www.annualcreditreport.com. This report will only show credit history, and not credit scores. To obtain a credit score, you can visit www.myfico.com.
Disputing Credit Errors
To dispute an error, you should first should contact the lender that reported the information to the credit bureaus. Next, contact the credit bureaus using the numbers listed on the credit reports. This also can be done online at www.transunion.com, www.equifax.com, or www.experian.com. If the report is more than 60 days old, you should obtain a new report, which may have a new phone number. If the report was obtained from a third-party site rather than directly from the credit bureau, you may have to order a report from the bureau to begin the dispute process. It usually takes 30 to 45 days to resolve disputes, although simple factutal errors can take less time.