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Joe Spake is a Memphis, Tennessee based Consultant, Real Estate Broker, and Blogger. Call 901.214.5563 for a consultation or click to make a social connection.
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Last Week (January 20, 2010) FHA announced policy changes that will impact home buyers beginning in April, 2010, raising costs associated with FHA loans.

Here are some highlights that effect the FHA buyer's pocketbook:

FHA Mortgage Insurance Premium (MIP) will increase by 0.5% (50 bps) to 2.25%. This is a front-end loan cost.  FHA also seeks to increase the maximum annual MIP that FHA can charge, in order to shift some of the premium increase from up-front to annual MIP (My read:  More money to close; possibly higher MIP premiums -higher house payment).

FHA applicants with FICO scores of less than 580 will be required to make a 10% down payment vs.  the normal 3.5% FHA down payment.

Reduce allowable seller contribution to 3% from 6% (My Read:  Many FHA buyers have been “cash poor” and, in the past have needed up to 6% of sales price in assistance from the seller to get the deal closed – this is a pretty big piece of cash that buyers will have to come up with from other sources.)

So, If you are in the market for a home now, and you are planning on using FHA financing, you can save yourself some money by closing before April.  Talk with your agent about how these changes impact your personal situation.

Here are the policy changes as stated in the FHA release

1. Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending
   • The first step will be to raise the up-front MIP by 50 bps to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge.
   • If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP.
   • This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing
   • The initial up-front increase is included in a Mortgagee Letter to be released tomorrow, January 21st, and will go into effect in the spring.
2. Update the combination of FICO scores and down payments for new borrowers.
   • New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.
   • This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well.
   • This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.
3. Reduce allowable seller concessions from 6% to 3%
   • The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.
   • This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.
4. Increase enforcement on FHA lenders
   • Publicly report lender performance rankings to complement currently available Neighborhood Watch data – Will be available on the HUD website on February 1.
     • This is an operational change to make information more user-friendly and hold lenders more accountable; it does not require new regulatory action as Neighborhood Watch data is currently publicly available.
   • Enhance monitoring of lender performance and compliance with FHA guidelines and standards.
     • Implement Credit Watch termination through lender underwriting ID in addition to originating ID.
     • This change is included in a Mortgagee Letter to be released tomorrow, January 21st, and is effective immediately.
   • Implement statutory authority through regulation of section 256 of the National Housing Act to enforce indemnification provisions for lenders using delegated insuring process
     • Specifications of this change will be posted in March, and after a notice and comment period, would go into effect in early summer.
   • HUD is pursuing legislative authority to increase enforcement on FHA lenders. Specific authority includes:
     • Amendment of section 256 of the National Housing Act to apply indemnification provisions to all Direct Endorsement lenders. This would require all approved mortgagees to assume liability for all of the loans that they originate and underwrite
     • Legislative authority permitting HUD maximum flexibility to establish separate “areas” for purposes of review and termination under the Credit Watch initiative. This would provide authority to withdraw originating and underwriting approval for a lender nationwide on the basis of the performance of its regional branches

Joe Spake is a Memphis, Tennessee based Consultant, Real Estate Broker, and Blogger. Call 901.214.5563 for a consultation or click to make a social connection.
If you enjoy this blog, please subscribe to the RSS Feed. 

If you use Google+, I have just started a brand new business page. Visit it HERE.

Second only to Foreclosures, Short Sales create a lot of buzz among investors and home buyers looking for the almighty good deal.  A short sale is a property that is sold for less than is owed on it.  Pretty simple concept:  you bought a house for $200,000 in 2004, with 10% down.  Over the years you pay down your $180,000 mortgage to $160,000.  Then for one reason or another… say, you lose your source of income, you REALLY need to sell.  BUT, because of the current housing market, your house is now only worth $130,000.  A tough pill to swallow, but you have to unload the house.  Well it beats having a foreclosure on my credit report.  But what about the $30K difference?  How will I come up with that money?  Welcome to the world of Short Sales.

Jay Thompson, The Phoenix Real Estate Guy, wrote one of the most concise and informative posts on short sales that I have read,   so I will skip the mechanics here and just say that the banks, being the altruistic entities that are, just love negotiating short sales with distressed owners, and what they love even more is working offers from buyers expecting a deal.  Maybe love is the wrong word, as it implies some human element.  The banks are not human, even though there is an interface with an Asset Manager, who, supposedly can make decisions.  Human decisions can be measured in milliseconds, but bank decisions can take weeks.  The bank does not care if your buyer’s loan lock or lease is running out, or even if she is a well-healed investor paying cash.  It’s the bank’s way or no way.  Oh, and if there is a second mortgage, double the trouble, because in a short sale, as opposed to a foreclosure, subordinate mortgage holders get a piece of the action too.

I closed my first short sale this month.  My buyer clients fit all the criteria for Successful Short Sale Buyers:
1.  They were not in a hurry to close
2.  They could have and would have walked away from the deal at any time.
3.  They had a very high tolerance for the erratic and inexplicable behavior of the bank.
4.  They stood their ground when the bank’s foreclosure representative tried to squeeze a fee out of them for delaying a foreclosure auction (the bank backed down and canceled foreclosure sales- twice).
5.  Their lender was flexible and helpful throughout the process.

So, for a purchase project started before Halloween with me preparing them for the process, Dave and Phoebe  were rewarded with a really good deal on one of the largest homes in their neighborhood.  Was it easy?  Was it worth it?  Let them tell you.

Joe Spake is a Memphis, Tennessee based Consultant, Real Estate Broker, and Blogger. Call 901.214.5563 for a consultation or click to make a social connection.
If you enjoy this blog, please subscribe to the RSS Feed. 

If you use Google+, I have just started a brand new business page. Visit it HERE.

I got a call from a reporter a while back doing an article about the practice of burying a St. Joseph statue in your yard to facilitate the sale of your home. While I have never tried this myself, I did post about the purported power of St. Joseph in December, 2007.

It was fun to re-read the post from Ardell at Seattle’s Rain City Guide that prompted that post 2 years ago.  It tells the long story of the tradition.   I was thinking about St. Joseph today and what he could do for today’s real estate market.  Perhaps it will take divine intervention to turn things around, but I would really like to know what the Church’s position is on the St. Joseph-buried-in-the-yard procedure.

Amazon.com offers 11 different St. Joseph Home Selling kits, ranging from $6.95-14.99, with even more in the sponsored links (some as low as $3.69).  I guess I should order some for testing purposes.

I was especially attracted to EcoJoe, the Original Eco-Friendly Saint Joseph Statue Real Estate Home Selling Kit, billed as “The Hardest Working Saint in Real estate.”  Hmmm, the packaging and marketing message certainly reaches out and grabs you.

So what do you think?  Is burying a religious icon in the yard a good way to get a house sold?  Can a friendly Eco-Joe bring in buyers for my listings?  Or can a real estate broker named Joe get the job done all alone?

Joe Spake is a Memphis, Tennessee based Consultant, Real Estate Broker, and Blogger. Call 901.214.5563 for a consultation or click to make a social connection.
If you enjoy this blog, please subscribe to the RSS Feed. 

If you use Google+, I have just started a brand new business page. Visit it HERE.

From Peter Goodman at the NY Times: Real Estate in Cape Coral, Fla., Is Far From a Recovery (ht Calculated Risk)

This is not the most uplifting article.  Goodman joins a Foreclosure Tour  and reports on the facets of the clean up of the messy real estate bubble burst.

Maybe I need to stop reading the national real estate news.   Every day there are more an more of this type of story, as well as auctions, short sales, bulk sales, foreclosures  – subjects we in the residential real estate business seldom, if ever, dealt with 5 years ago.

We were busy helping folks achieve the American Dream of home ownership.   The last decade brought about remarkable changes in the real estate market and the real estate business.    It is time that we pull ourselves out of this mess and reclaim the American Dream.  Sure, there is room for the investors, who seem to be ubiquitious in the markets, but I am ready to help bring back the Dream – folks buying homes to live in!

Joe Spake is a Memphis, Tennessee based Consultant, Real Estate Broker, and Blogger. Call 901.214.5563 for a consultation or click to make a social connection.
If you enjoy this blog, please subscribe to the RSS Feed. 

If you use Google+, I have just started a brand new business page. Visit it HERE.