1/7 Rate Report & Homebuyer Tip of the Day

Appraisals and You: Why you need to be proactive

Good Evening Folks,

I thought I'd share a bit of advice with you, my dear readers which I've learned the hard way recently. My pearls of wisdom (ie; nuggets of "hard cheese") are regarding the landscape we in the Housing Industry are currently attempting to navigate regarding appraisals.

It's been a very difficult couple of years for home values as I'm sure many of you can attest to. Whether you're purchasing a home, selling one or trying to refinance one, values tanked when the foreclosure crisis first hit. They somewhat rebounded when the Homebuyer Tax Credits (remember there were two rounds of them) created a flurry of activity in the marketplace. And now they've begun another maddening decline since April (when the tax credits expired). This post isn't to discuss why values are tanking again. That is a subject which would probably require a PhD dissertation and I'm not in the mood for grad school tonight.

What follows are some tips which Listing Realtors, Selling Realtors, Sellers and Homebuyers should keep in mind if you're at all concerned with the value of a property when mortgages are involved. Yes; I basically just called out each and every party to a typical real estate transaction. You think your jobs end when the sales agreements are signed? Think again! (or risk never reaching the closing table)

1) Provide the CMA to the Appraiser when he shows up for informational purposes. Now more than ever when Appraisers are forced to look to foreclosures, short sales and just plain old stale sales (comparable properties which sold more than 6 months ago) it will only help your case to provide the logic for how you priced the house.

2) In the event that the house sells considerably under / over "Asking Price" provide comps which you believe will support the sale price. Don't assume the Appraiser will find them on their own. Make their life easier and you shall be rewarded! (hopefully...no seriously...cross your fingers)

3) If there has been work done which you believe added value to the property provide a detailed and easy-to-read list of the work performed. Show the house off when the Appraiser shows up! Remember though that not all home improvements add value "dollar for dollar". The ones that will add the most will have increased the "functional utility" of the house.

4) Clean!!! This is a no brainer. If you just don't have the time to get the house in top shape because you're too busy with other things; well maybe you're too busy to obtain financing on that property as well. Realtors can attest to the absolute necessity of curb appeal to attract buyers. In my opinion the same can be said of Appraisers. You say they should be able to see through your mess; it's their job. I say; they're human, just like you and me. If they walk into two identical houses and one is immaculately maintained and one looks like you just had a birthday party for an 8-year old, I would put my money on the former to appraise for a higher value. Appraisers are subjective. (Highlight that.)

5) Greet the Appraiser courteously, promptly and make sure they can get in and out of every room in the house with ease. Don't let the dog bark at them or bother them in any way. Your chocolate lab might be a total sweetheart and only barking because she's happy to see someone but the Appraiser doesn't want to deal with it one way or the other. Trust me. An Appraiser wants to get in and out quickly. They are not well paid for what they do these days. They want to spend as little time as possible looking at, researching or writing about your house. Make sure their first impression couldn't be more pleasant and getting them in / out quickly goes a long way.

6) And this is the final tip which sums up the need to pay attention to the first five. Don't rely on your mortgage professional to do any of the above. The Home Valuation Code of Conduct which was widely adopted for all Fannie Mae / Freddie Mac / FHA & VA loans this year won't allow us to have ANY contact with Appraisers. If you believe a house should appraise for a certain value and are relying upon mortgage financing it's your job to make sure the Appraiser believes in it as much as you.

The caveat here is that you can't "influence" an Appraiser's opinion of value. My tips above if presented for "informational" and helpful purposes only, should at least show an Appraiser that you've thought about the true value of the house and not pulled a pie-in-the-sky number out of the air.

Finally, all the above being said; sometimes a house just isn't going to appraise where you think it should. These are trying times we find ourselves in and we all have to hunker down and plod ahead.

Buenos Noches!

vLogging

Good Afternoon Everyone,

It's been quite awhile since I last posted to this blog but coming into the end of the year I've decided to start spouting my opinions once again.

There's been a ton of changes in the mortgage and real estate industries in the last year so I thought it might be a cool idea to create a YouTube channel. Starting tomorrow 12/22/10 I'll be posting a video blog or vlog as the internet has dubbed it daily.

It'll include my observations on interest rates, housing sector issues, economics and probably a bit of advice about mortgage programs. I'm new to posting video on the net so I'm going to take baby steps, starting with just a good ole fashion webcam.

That's it for today. Click on the title of this post to check out my channel tomorrow afternoon. Hint: www.youtube.com/andrewshartenberg

- Andrew

Bond Market Rout Lifts Mortgage Cost

ALL BUSINESS: Bond-market rout lifts mortgage cost

ALL BUSINESS: Bond-market rout boosts mortgage rates, undermining economic prospects

• Rachel Beck, AP Business Writer
• On Saturday June 6, 2009, 8:40 am EDT

• Print

Related:

• Freddie Mac

NEW YORK (AP) -- The Federal Reserve announced a $1.2 trillion plan three months ago designed to push down mortgage rates and breathe life into the housing market.

Related Quotes

Symbol	Price	Change
FRE	0.72	-0.04

{"s" : "fre","k" : "c10,l10,p20,t10","o" : "","j" : ""}

But this and other big government spending programs are turning out to have the opposite effect. Rates for mortgages and U.S. Treasury debt are now marching higher as nervous bond investors fret about a resurgence of inflation.

That's the Catch-22 threatening to make an awful housing market potentially worse and keep the economy stuck in a funk. Kick-starting the economy requires higher spending, but rising rates mean fewer Americans will be able to refinance their home loans. And some potential buyers will be shut out of the market by higher monthly payments they won't be able to afford.

To understand how this is all connected, you have to think like a bond trader. Inflation is their enemy because it means the purchasing power of the dollars they receive when bonds eventually are paid off will be diminished. The only question is by how much.

Yields on 10-year Treasury notes, a benchmark for home mortgages and other consumers loans, jumped from 2.5 percent in March around the time of the Fed announcement to as high as 3.7 percent in recent days as signs that efforts to stabilize the financial system and economy were starting to pay off. And 30-year mortgage rates jumped more than a quarter-point this week to 5.29 percent, the highest level since December, Freddie Mac reported.

"If the meltdown continues in the bond market, then mortgage yields will soon be at levels that choke off refinancing activity," said economist Ed Yardeni, who runs his own investment firm. "Even worse, they could abort any necessary recovery in home sales and prices."

Yardeni coined the term "bond vigilantes" in 1983 to describe how traders took matters into their own hands when they felt the Fed wasn't doing enough to fight inflation, which was running at an annual rate of more than 3 percent at that time.

So what has set off the vigilantes this spring, at a time when the consumer price index is down at an annual rate of 0.7 percent?

One explanation is that bond investors anticipate a greater supply of government debt being sold to fund federal spending. Investors are also increasingly fearful that the trillions of dollars the government will need to borrow in the coming years to finance the various stimulus programs will lead to a new bout of inflation.

The White House estimates that the government will rack up an unprecedented $1.8 trillion budget deficit this year -- more than four times last year's all-time high.

"The bond market is calling the Federal Reserve out," said Mike Larson, a real estate analyst at Weiss Research Inc. in Jupiter, Fla. "Investors are saying that the Fed can't just print money out of thin air to finance a massive deficit."

Fed Chairman Ben Bernanke acknowledged Wednesday in congressional testimony that large budget deficits could threaten financial stability by eventually eroding investor confidence and endangering the economy's prospects for long-term health.

"Even as we take steps to address the recession and threats to financial stability, maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance," Bernanke told the House Budget Committee.

That kind of talk is meant to calm bond investors' nerves. It also shows the quandary faced by Bernanke and other federal officials. They need to hold down interest rates through massive government spending at the same time they have to deal with worries over how that spending could damage the economy over the long term.

After Fed policymakers this spring said they would buy billions of dollars of government debt and more than $1 trillion of mortgage securities, 30-year fixed mortgage rates fell to 4.78 percent in April, the lowest since Freddie Mac started surveying rates in 1971.

Sales of new and existing homes began to trend higher. Mortgage refinancings also jumped, allowing borrowers to lock in lower rates. Fee income from this activity helped lift profits at many battered banks and gave consumers more disposable income to spend, which helped lift their confidence about the economy's prospects. All that was good for the nation's businesses.

But now, surging mortgage rates are threatening to undermine all that. Seventy percent of refinancing activity could be knocked out as rates close in on 5.5 percent, according to Mark Hanson, a managing director at the independent research firm Field Check Group of Menlo Park, Calif.

That's because homeowners wouldn't get much of a benefit if a refinancing only reduces monthly payments a tiny bit while they are stuck paying closing costs that typically run about 2 percent of the loan amount.

Also, many homeowners who wanted to refinance didn't lock in the super-low rates in April when the refi boom took off. "Half the deals in the pipeline are dead," Hanson said. "People were applying to refinance to improve their situation, but now they are seeing it won't be much improved."

All this means that even though mortgage rates are still low by historical standards, many of the trends that seem to be pointing to economic recovery in recent months could be undone fast.

Rachel Beck is the national business columnist for The Associated Press. Write to her at rbeck(at)ap.org

First Time Homebuyer Tax Credit

Tax Credit Can Be Used for Down Payment

Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, on Tuesday said that the Federal Housing Administration is going to permit its lenders to allow home buyers to use the $8,000 tax credit as a down payment.

Previously, most buyers wouldn't receive the funds until after they filed their tax return, and that deterred some people from using the credit. The NATIONAL ASSOCIATION OF REALTORS® has been calling for the change.

"We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down payment," Donovan says. His remarks came in an address to several thousand REALTORS® gathered Tuesday morning at "The Real Estate Summit: Advancing the U.S. Economy," at the 2009 REALTORS® Midyear Legislative Meetings & Trade Expo in Washington, D.C..

He says FHA's approved lenders will be permitted to "monetize" the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.

Other Solutions for Today's Market

During his address at the summit, Donovan went on to say that the Obama administration plans to further stabilize the housing market. "I do think we have some early signs that the market overall is stabilizing," Donovan says. "Since January we've seen both home sales moving up and down around a relatively stable number and we are seeing the first signs that the rapid decline in home prices is starting to abate."

The morning session included a panel discussion that was moderated by CNBC's Ron Insana. Panelists examined cutting-edge solutions necessary to promote and preserve homeownership and real estate development, stimulate the economy, and protect the nation's taxpayers. They also shared their ideas on what the role and responsibility of the federal government is in the revitalization effort.

"Right now the Federal Reserve is the market," said panelist Jay Brinkman, chief economist for the Mortgage Bankers Association. "What will be the effect when the Fed stops buying?" Brinkman explained that an exit strategy must be planned for the long-term; the federal government cannot continue to support the mortgage markets indefinitely.

"We are thrilled that so many high-caliber individuals were able to join us today at this important meeting to promote stability in the housing market and the U.S. economy," said NAR President Charles McMillan. "We look forward to an ongoing dialogue and action toward this goal, during our midyear meetings this week and beyond."

The real estate summit is part of the 2009 REALTORS® Midyear Legislative Meetings & Trade Expo. During the week ending May 16, more than 8,500 REALTORS® will attend meetings, visit lawmakers and inspire action on Capitol Hill.

Source: NAR

First Time Home Buyer Tax Credit

You've probably heard a lot about a tax credit of $8,000 for purchasing your first home. So what are the specifics?

First and foremost, anyone looking to take advantage of this First Time Home Buyer Tax Credit should seek the assistance of a tax professional. This author is not a tax professional and this is only my interpretation of the basics on how the tax credit works.

That being said here are few points to consider.

What it is;

A tax credit of 10% of a home's purchase price up to a maximum of $8,000. It is a tax credit meaning you must purchase the home before you are able to claim it.

Timeframe;

You must purchase a home before December 1, 2009

Do you qualify;

You must be a First Time Home Buyer meaning you can't have owned real estate within the previous three years. In addition you have to fall within the income limits of $75,000 AGI if filing single and, $150,000 AGI if filing jointly to qualify for the full credit.

Do you have to repay;

If you live in the home for the first three years of ownership you will not be required to repay the credit.

When can you claim it;

You can claim it on your 2008 Tax Return or 2008 Amended Tax Return if you've already filed. You can also claim it on your 2009 Tax Return.


Obviously the tax credit is a hefty incentive to purchase a home this year. To take advantage of what essentially amounts to "free" money you should seek the advice of a tax professional and a mortgage professional so you can get to the bottom of just how much you can expect to receive and what you can afford. With rates in the mid 5.00% range, prices lower than they've ever been and the limited time frame for the tax credit First Time Home Buyers are in a better position than ever to take the leap.

- Andrew

Affordable Refinance & Modification

Good Afternoon Folks,

By now we've been bombarded with speculation over the details of the PBO's Homeowner Affordability & Stability Plan. I'm sure many of you out there are wondering how to take advantage of it.

The specifics available currently can be found at the Treasury Department website. There are basically two parts to the plan.

The first is The Home Affordable Refinance. In a nutshell this is a program that is not widely available yet, but will be 4/4/2009. Through it, homeowners who owe more than 80% of what their home is currently worth will be able to refinance to lower interest rates with no Private Mortgage Insurance. It will also allow homeowners to refinance from ARMs to Fixed-Rate loans.

The caveat is that your loan must be owned by one of the Government Sponsored Entities (GSE); Fannie Mae or Freddie Mac. You will also need to be current on the mortgage with a good payment history.

To find out if your loan is owned by Fannie Mae click here.
To find out if your loan is owned by Freddie Mac call 1-800-FREDDIE.

The second part the of the plan is The Home Affordable Modification. The specifics of the modification are a bit murkier in that not every loan servicer, lender or bank is required to take part. It seems that it will be required that any entity using TARP or TALF funds will have to though. The place to begin for those homeowners in trouble and at risk of foreclosure is to contact your servicer. You should also contact a HUD Housing Counselor for assistance. Negotiating with mortgage servicers can be difficult and to make sure you have the best chance for a meaningful modification that will be a successful long-term solution you should enlist the advice of a counselor. In Rhode Island you can also contact Rhode Island Housing.

Now onto an update of interest rates.

Currently we're seeing rates holding steady across the board around 5.50% for Conventional and Government loans. Portfolio mortgage program rates for 30 Year Fixed loans are holding around 5.375%. The yield on 10-Year Treasuries is fluctuating between 2.85 - 2.95. As I've maintained until we see the yield drop into the mid to low 2.00 range mortgage rates won't decrease meaningfully.

- Andrew