Politics and Government 

Several New Bills Would Sharply Curtail Role of Fannie Mae and Freddie Mac

House Republican leaders last week introduced eight bills that represent immediate steps that Congress could take to build a private-sector based housing financing system.

The legislation — aimed at sharply curtailing the role of housing government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac in the U.S. mortgage market — drew a sharp rebuke from NAHB.

“These proposals, along with similar plans announced by the Obama Administration in February, would further destabilize a housing market that is already struggling and impede economic recovery,” said NAHB Chairman Bob Nielsen.

“The historical track record clearly shows that the private sector is not capable of providing a consistent and adequate supply of housing credit without a government backstop,” Nielsen said.

“Housing can be the engine of job growth this country needs, but it can’t fill that vital role if Congress and the Administration make damaging, ill-advised changes to the housing finance system at such a critical time,” he said.

Following is a summary of the eight bills unveiled last week:

• H.R. 31, The Fannie Mae and Freddie Mac Accountability and Transparency for Taxpayers Act would increase oversight over Fannie Mae and Freddie Mac by establishing an Inspector General within the Federal Housing Finance Agency (FHFA) to submit regular reports to Congress on GSE business activities.
• The Equity in Government Compensation Act of 2011 would suspend the current compensation packages for all employees of Fannie Mae and Freddie Mac and establish a compensation system consistent with the federal government.

  The legislation further expresses the sense of the Congress that the 2010 pay packages given to senior executives at Fannie Mae and Freddie Mac were excessive and that the money should be returned to taxpayers.

• The GSE Subsidy Elimination Act would direct the FHFA to phase in a guarantee fee increase over two years to ensure that Fannie Mae and Freddie Mac price such guarantees as if they were held to the same capital standards as private financial institutions.
• The GSE Risk and Activities Limitation Act would prohibit Fannie Mae and Freddie Mac from offering, undertaking, transacting, conducting or engaging in any new business activities.
• The GSE Debt Issuance Approval Act would require the Department of the Treasury to formally approve any new debt issuances by the GSEs.
• The GSE Credit Risk Equitable Treatment Act of 2011 clarifies that Fannie Mae and Freddie Mac would be held to the same standards as other secondary mortgage market participants.

  The GSE Mission Improvement Act would permanently abolish Fannie Mae and Freddie Mac’s affordable housing goals.

• The Portfolio Risk Reduction Act would accelerate and formalize the reduction in the size of the GSE’s portfolios by setting annual limits on the maximum size of each retained portfolio and lowering the limits over five years until they have reached $250 billion.

 It All Heats Up

First Tunisia. Then Egypt. The protests have spread over North Africa and the Middle East. But the markets, especially oil, did not get really spooked until the action in Libya intensified. What is the difference? Libya is an oil exporting nation. Not only have the protests in Libya affected oil supplies, the markets are now thinking about what happens if a country like Saudi Arabia is next. There is a big difference between the less than two million barrels per day that Libya produces versus the more than eight million that Saudi Arabia produces. Right now the Saudis represent a potential escape valve that can minimize short-term disruptions. After easing back over the past few weeks, oil prices shot back over $90 per barrel during President’s Day and topped $100 per barrel by mid-week.

Some analysts are predicting that $4.00 per gallon gasoline could be seen this year. Last week we spoke of two obstacles for the economic recovery to overcome. One is real estate. Another is shrinking government stimulus. High gas prices are also a potential barrier to economic growth. Right now consumer confidence is at a three year high. Nothing can cause consumers to cut back more quickly than having to pay $4.00 at the pump. Are we saying that this is going to happen? Absolutely not, but this is the reason that events overseas are dominating the headlines. Bringing democracy to other countries is a good thing, but economic disruptions can cause hardships in the short-run. If there has been any benefit to the run-up in oil prices, it is the fact that rates have eased back down for the moment. Earlier when oil prices spiked, rates were going up as well because the causal factor was strong economic news. Lower rates are the one thing that can help cushion the pain of higher gas prices.

Data from Moody’s Analytics shows that U.S. home affordability returned to pre-bubble levels in a growing number of markets over the last year as price depreciation set the stage for a housing rebound. Of the 74 markets tracked, affordability at the end of the third quarter had either returned to or surpassed the average reached between 1989 and 2003 in 47 of those markets. At the same time, however, price drops left more borrowers owing more on their loan than the property is worth. Source: WSJOnline.com

Home sales should continue to climb this year because of the strengthening economy and the high affordability of property, according to one private insurer. PMI Mortgage Insurance Co. expects existing home sales to rise 8.3% to 5.31 million units in 2011 with new home sales increasing 29% to 415,000 units. If rates are rising due to a recovery in the overall economy, then the consequent jobs growth ’should more than offset’ the higher rates and boost home sales, according to PMI. But if rates are climbing because of higher inflation or a declining value of the U.S. dollar, jobs growth won’t come and home sales will decline this year. ‘At this point, it is more likely that home loan rates are rising because of strong economic growth than for other reasons — or at least mostly for growth reasons,’ PMI said. Source: HousingWire.com

For-sale-by-owners are rare nowadays. In fact, the number of FSBOs dropped to record lows over the past year. Unrepresented sellers make up just 11 percent of the market, down from 13 percent in 2009, according to the 2010 National Association of Realtors® Profile of Home Buyers and Sellers. With today’s more complex transactions–such as with short sales and foreclosures and frequent changes in lending–more sellers are finding comfort in the help of real estate professionals to guide them through the process. FSBOs once were lured to try to sell themselves because they thought they could save on commission fees, but now sellers are realizing that if they don’t use an agent, it’ll likely cost them more in the long run, experts say. ‘Selling by owner does not guarantee the seller will put 5 [percent] to 6 percent more in his or her pocket in trade for doing all the work and taking on potentially costly liabilities,” Margaret Woda, associate broker with Long & Foster in Crofton, Md., told The Washington Times. “On the contrary, prospective FSBO buyers have their eyes on that 5 percent to 6 percent as well. It’s more likely the buyer will win this negotiation in a buyer’s market with a huge price reduction–probably even larger than the saved commission.’ Some FSBO sellers also often make the mistake of listing their home at a higher price than the market warrants. But even if they do find a buyer for that price, unless it’s a cash purchase, the home has to be appraised and many deals can then fall apart. Source: TheWashingtonTimes.com

Home warranties can be attractive to home owners or buyers who are looking at purchasing a property. These service contracts can cover all of a home’s major systems, such as the furnace or air conditioner, and will cover needed repairs if the appliance breaks or is damaged. Some sellers are offering a home warranty to try to lure buyers. But not all home warranties are the same. Experts say you should carefully weigh costs, policy allowances, and customer feedback before making a decision so that you ensure you’re getting the best deal. Home warranties cost about $250 to $500 a year. Here are some more tips from experts in shopping for a home warranty:
• Find customer reviews. Web sites, such as homewarrentyreviews.com, provide reviews of home warranty companies. You also might check how each company is rated with your local Better Business Bureau.
• Check for extra fees. Will you have to pay a fee for service calls?
• Check the coverage allowance. Are there any exclusions to coverage? Will the allowance cover the entire cost of a broken appliance or just some of it? For example, if you have older appliances and mechanicals, will the policy cover the full cost of replacing it or just the depreciated value? If the policy only covers the depreciated value when a 20-year-old furnace dies, for example, the reimbursement may not be enough to buy a new one. Also, verify what appliances are all included in the coverage. Some companies will allow you to add coverage for swimming pools, while others won’t. Source: ChicagoTribune.com

Washington, January 27, 2011

Pending home sales improved further in December, marking the fifth gain in the past six months, according to the National Association of Realtors®

The Pending Home Sales Index,* a forward-looking indicator, increased 2.0 percent to 93.7 based on contracts signed in December from a downwardly revised 91.9 in November. The index is 4.2 percent below the 97.8 mark in December 2009. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, credits good affordability conditions and economic improvement. “Modest gains in the labor market and the improving economy are creating a more favorable backdrop for buyers, allowing them to take advantage of excellent housing affordability conditions. Mortgage rates should rise only modestly in the months ahead, so we’ll continue to s“In the past two years, home buyers have been very successful, with super-low loan default rates, partly because of stable home prices during that time. That trend is likely to continue in 2011 as long as there is sufficient demand to absorb inventory,” Yun said. “The latest pending sales gain suggests activity is very close to a sustainable, healthy volume of a mid-5 million total annual home sales. However, sales above 6 million, as occurred during the bubble years, is highly unlikely this year .”The PHSI in the Northeast increased 1.8 percent to 73.9 in December but is 5.3 percent below December 2009. In the Midwest the index rose 8.0 percent in December to 84.6 but is 5.1 percent below a year ago. Pending home sales in the South jumped 11.5 percent to an index of 101.9 and are 1.7 percent above December 2009. In the West the index fell 13.2 percent to 105.8 and is 10.7 percent below a year ago. The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales; it coincides with a level that is historically healthy.

NOTE: Existing-home sales for January will be reported February 23 along with revisions for the past three years, and the next Pending Home Sales Index will be released February 28. Fourth quarter metro area home prices and state home sales will be published February 10; release times are 10:00 a.m. EST.

In recent months, consumers have shown more confidence in the economic state of America. In fact, according to the Consumer Research Center, consumer confidence posted its third consecutive monthly gain-up 63.3 from last month’s 57.7, and though this is still weak by historical levels, it appears to be gaining ground. This 5.6% increase may seem minor, especially given that a consumer confidence number over 90 means that the economy is on solid ground, but the higher number shows that consumers are feeling more confident about the upcoming months.

This increase, when paired with the current low interest rates has many analysts saying that now is the time to buy a house or have a house built. In fact, according to a May 25^th Associated Press report, the rate of home building has now risen by 40% since April of 2009. The article goes on to say that the Commerce Department reported this week that the amount of construction of single family homes and apartment buildings increased 5.8% last month, which matched the high of October of 2008. More encouraging is that the sale of new homes rose 27% in March for the biggest increase in 47 years; matter of fact, this week’s top headlines in the housing industry are:

• Existing Home Sales Data: Home sales for the month of April come in at 5.77 million, versus the consensus of 5.62 million. On a month-over-month basis, existing home sales rose 7.6%, which compares to the economist consensus of up 5.1%.
• Home Price Index- First quarter numbers were released
• Home Sales Data- What areas of the country are doing better/worse in the house buying/selling market

This increase in buying/selling and building, likely precipitated by the tax credits, means more opportunities for consumers to take advantage of the lower interest rates currently hovering at 5%. And while all is not perfect, things are looking better.

If you have been thinking about building or buying a home, now is the time to act. After all, low interest rates paired with lower home prices, won’t last forever. And while the housing market varies from state to state (as well as by city), the areas surrounding Raleigh, North Carolina are seeing an increase in residential building and home sales. According to recent reports, the Raleigh real estate market is on the rise with home purchases in the north and northeastern part of the city increasing by 10%. For homes listed with area realtors, there was an average of 101 closings in February with numbers rising since then. Also encouraging is that Raleigh area showings increased by as much as 22% (depending on the asking price) and listings by 7%. Popular neighborhoods for buying and selling were those in Falls Lake and Brier Creek, though many others saw growth as well. Local mortgage analyst  feel that the increase in home buying and building is a combination of a slightly lower Raleigh unemployment rate, the lower interest rates and the current concern over the European market.

So, if you have been thinking that a move is looming your future, don’t delay. This is the time to buy or build the house you have always wanted.

April 30, 2010 is the last day in which to take advantage of the homeowner’s tax credit of $8000 for first-time buyers and $6500 for previous homeowners. This means that sales must be completed OR a binding sales contract must be signed by April 30, 2010, and the actual sale completed by June 30, 2010. The deadline dates are the same for both first-time home buyers and repeat home buyers.

If the danger of missing out on a tremendous tax credit isn’t enough to light a fire under first-time or repeat home buyers, consider also that interest rates are still extremely low. This means that it may be possible to afford a larger home than previously believed, provided approval is granted.

Still not convinced? Well, then, how about the fact that this year will bring major changes to FHA loan requirements. These changes include, but are not limited to:

• Homebuyers must have a credit score of at 580 to qualify for the FHA 3.5% down payment program. If your credit score is lower than 580, you will have to come up with a down payment of at least 10%.

Now is a good time to check your credit score, and make any corrections that may be needed. Don’t delay, however, if you are going to do this, because it can take a little time for the corrections to appear, and you will be working against the April 30 deadline.

• Sellers will be limited in the amount of money that they can offer to pay at the time of closing. Sellers could once give buyers 6% of the home’s price; it has not been reduced to 3%.
• Lenders who offer FHA mortgages will be more closely scrutinized. This may cause some lending companies to no longer offer FHA mortgages, making it harder to find somewhere that does.

There simply is no better time to buy a home than right now. Even though the deadline is rapidly approaching, it is still a buyer’s market out there, and things are still working in the favor of those looking for a new home.

Don’t delay. If you have even been considering buying a new home (and, remember, this means first-time ever home buyers, and repeat home buyers), you should act now. Don’t let the opportunity of a lifetime, to own a new home, slip through your fingers.

Freedom Family Homes has a wide selection of move-in ready homes from which to choose. We understand the urgency of the approaching deadline, and will help you in any way possible to start the process of home buying so that you will be eligible for the tax credit.

There is even still time to pick out your house plans and make arrangements to have your home built. We have dozens of styles to choose from, and, once you have made your choice, we can help you with that aspect of owning your home. Visit our website at www.freedomfamilyhomes.com/floor-plans/ today and see what we have to offer.

Even with everything that has happened with the economy, there is still no better time to buy a home. If you are even considering home-buying, you would be wise to move from consideration to serious action.

The Home Buyer Tax Incentive is still in effect; however, as the title of this article states, time is ticking away. Homes must be under a contract by April 30, 2010, and closing must occur by June 30, 2010, in order for homebuyers to receive the tax incentive.

Remember, also, that this tax incentive program is different from the “first-time home buyer tax credit” that was being offered during 2008 and 2009. Both first-time homebuyers AND those who have lived in the home they currently own for a period of five years consecutively out of eight years are eligible.

So, with all that in mind, this is a good time to sit down and take a good look at your current credit status. If you are like most people, you may not even know where to begin, so we’ve provided a checklist of things to look at when you are examining your credit records and history, to help you with your home buying decision.

First, obtain a copy of your credit report. TransUnion, Experian, and Equifax are the three credit reporting companies who have this information. You can obtain a separate copy from each one, or there are websites and other locations that will let you obtain all three with just one request.

Once you have your credit report, sit down and review it thoroughly. This is not at hard as it may sound, as clear explanations are given on each report regarding how to read the report.

You are looking for three things: errors, inaccuracies, and suspicious entries. Errors can include paid off and/or closed accounts still showing open or with an open balance. Inaccuracies can include reports of late payments when there were none, or inaccuracy in reporting the amount of payments. Suspicious entries are those accounts which you do not readily recognize or know for certain that you never opened or applied for.

If any part of your credit report is inaccurate, take steps immediately to correct them. Go to the website of the credit reporting company where the error appears, and submit a request for correction of your credit report. The company must, by law, review your submission, and, if necessary, correct any errors or inaccuracies.

If you do have to file a correction request, make periodic contact with them. You don’t want too much time to pass before the corrections, if any are needed, are made.

Next, look at your current debt-to-income ratio. You should have no more than 20% of your income going towards paying bills. If it is more than that, you will want to immediately start lowering that percentage.

If, after doing all this, you realize you are in a position to buy a home, please “Mouse-Over” the “Move In Inventory” tab on the left-hand side of our website and you will see a number of locations with homes that are ready for immediate occupancy. We look forward to seeing you in your new Freedom Family Home.

On November 6, 2009, President Obama signed “The Worker, Homeownership and Business Assistance Act of 2009”, otherwise known as the “The Home Tax Credit”.  The new bill extends the housing credit that was about to expire plus adds new benefits for many that would not have qualified before.

The Home Tax Credit is an act whereby first-time home buyers will receive a tax credit of $8,000, and “move-up/repeat” home buyers will receive a $6,500 tax credit. Because these are tax credits, the IRS has provided definitions or explanations for the terms “first-time home buyer” and “move-up”/repeat home buyer.

According to federalhousingtaxcredit.com, “first-time home buyer” is “someone who has not owned a principal residence during the three-year period prior to the purchase.  A  move-up/repeat home buyer “must have owned and lived in their previous home for five consecutive years out of the last eight years”.

The $8,000 and $6,500 figures are the maximum amount of tax credit that can be received. In other words, your tax credit amount may be less than $8,000 or $6,500, depending on what 10% of your home’s purchase price is. It will not be more than $8,000 or $6,500. Further, the purchase price of the home must be $800,000 or less in order to be eligible for the tax credit.

First-time homeowners who bought houses after January 1, 2009 and before or by April 30, 2010, are eligible. If, however, first-time home buyers enter into and sign a binding sales contract by April 30, 2010, they will be eligible as long as all purchase arrangements have been completed by June 30, 2010.

Tax credit eligibility for repeat home buyers applies to homes purchased after November 6, 2009 and before or by April 30, 2010. Repeat home buyers have the same rights concerning entering into and signing a binding sales contract by April 30, 2010 and purchase arrangements being completed by June 30, 2010, just as first-time buyers do.

Home buyers purchasing houses on or after January 1, 2009 and by or before November 6, 2009 can only make up to $75,000 if they file single tax returns and up to $150,000 if they are a married couple who files joint tax returns.

Single taxpayers who purchase homes after November 6, 2009 and by or before April 10, 2010 can earn up to $125,000 however while married couples who purchase homes during the aforementioned time period can
earn up to $225,000. If this is the case, they will qualify for the full tax credit.

As you can see, the new Home Tax Credit will help not only new home owners but many others that need that extra push or helping hand to get into the buyers market.  This in turn will also help others who are involved in the home sales industry. This includes, although it is certainly not limited to, realtors and builders and lenders. This in turn will strengthen the housing market, which we believe will have a positive effect on the economy.

The $8000 first time home buyer tax credit  is set to expire on November 30th, 2009. Congress has considered extending this, a move that the the National Association of Home Builders (NAHB) applauds. Under a recently introduced bill, the credit would be extended for one year for any qualifying service member. If the service member experiences a change in duty station and must move within three years, the recapture requirement would also be waived.

Another bill introduced would only extend the tax credit for six months. This bill is not as popular with the NAHB, who wants to see a one-year increase for all buyers, but it has six co-sponsors and a lot of support. It is estimated that more than 383,000 additional home sales would be seen if the $8000 first time home buyer credit were extended for a year and made available to all Americans, regardless of whether they are first time buyers or not.

There are programs in Congress to extend the tax credit and raise it to as much as $15,000, but none of these bills have passed yet. Whether any of them will pass or whether time will run out and the credit will expire remain to be seen. The US housing market, while improving, is still weak in comparison to where it used to be. With that being the case, a lot of people who are struggling right now want to see the credit extended so that the economy can stay strong.

Some economists believe that an extension of the credit is required, or there will be even more weakness in the housing market. Part of that weakness comes from the fact that so many people have lost their homes to foreclosure, and allowing these people to purchase homes again can help them recover as individuals and can help the US economy as a whole. Under the current credit, a person has to be purchasing his first home or not have been a homeowner for at least three years.

Extending the credit by one year would cause more people to fall into that three year window, thus affording them the same tax break that people who qualify for the credit now enjoy. Extending the $8000 home buyer credit to everyone would allow for people who have sold a home to relocate or simply find a lower-cost home in their area and purchase it while still getting the tax break that could help them succeed and move forward.

There are concerns about where the money for the tax breaks will come from, but right now it appears that it will come from money that’s being recaptured from the stimulus funds. Some places refused these funds or have not used all of them, and these can be reused in order to help offset the home buyer credit. Congress has little time to make a decision, however, so whatever it decides to do will need to be put in place quickly to avoid an interruption in the home buyer tax credit.

These are some of the toughest economic times that many of us have ever seen. With rising unemployment rates, record number of foreclosures, and a bleak economic forecast, it would seem rather difficult to find a silver lining. However for those in the market to buy a house or even considering this important purchase, there can be some great incentives. With interest rates continuing to go down over the last three weeks, there is even more motivation to start looking for that dream house.

Mortgage demand was up in June, and this is due to a couple of various factors. There is a good portion of this demand that is attributed to those that wish to refinance their current homes while the rates are in their favor. In the midst of a rather bleak economic state, this can offer some the opportunity to incur lower monthly costs and a better long term big picture for them. Another major factor in mortgage demand being up is the fact that potential first time home owners are starting to see that now is the time. With low interest rates and very enticing added incentives, first time home owners are probably the luckiest segment in these tough economic times.

Bernanke’s Stance on Interest Rates

Special attention is being paid to Bernanke’s last session with Congress as interest rates were a big topic of discussion. He defended the low interest rates and concluded that they should stay at the low point they are currently at until the unemployment rate starts to decrease. While some may argue with this logic and it sparks a rather heated debate amidst excessive government spending, this too can benefit those who wish to purchase a home with no end in sight for the potential this holds. If interest rates continue to stay low, this can even benefit the currently unemployed once they are back on their feet and in a place where they are capable of and interested in purchasing a home.

Mortgage Demand May Signify Beginning of Crisis’ End

Though it may be tough to see a light at the end of the tunnel, particularly for those unemployed or in a bleak financial situation, there are some that can benefit from these economic times. We may very well continue to see the mortgage demand continue to rise month after month, acting as another boost to an economy that wants to get back on track. With the additional $8000 tax incentive acting as a carrot for first time home owners, it’s pretty hard not to start seeking out your dream house. So whether you are a household that just wants to get a better rate on your current home through refinancing or considering owning your first home, the low interest rates can be extremely beneficial to you. As long as the rates stay this low and incentives continue to be thrown out there, mortgage demand can be expected to steadily increase. This is good news for a staggering economy that is expected to get better in the coming months.

Take Advantage: FHA Housing Credit Expires Soon!

When it comes to saving money on taxes, most people are willing to do just about anything to cut a few dollars from what they owe. We learned earlier this year that because of the 2009 American Recovery and Reinvestment Act, new homeowners were able to get serious benefits on their 2008 tax returns. One of those benefits is the FHA Housing Credit, which allows you to take a tax credit of up to $8,000 if you’re a first-time homebuyer.

And while this was beneficial at tax-time, you can still take advantage of this tax credit. But you’ll need to act fast as it expires in December!

The great thing here is that you can take advantage of this opportunity upfront. That means, you can obtain the housing credit from a third-party lender and use the $8,000 to put toward your upfront housing costs. For instance, if the home needs fixing up, you could use this cash to put toward repairs or additions. This is especially beneficial because you are then reinvesting the money in your new home, which subsequently boosts the value of the property.

Normally, mortgage interest is tax deductible, but property taxes are also deductible now and allow you to save even more. These are all vital things to keep in mind when deciding to purchase a new home. Even though the economy is in a difficult spot right now, there has never been a better time to invest in real estate. Property costs are down and with incredible tax credits and benefits like these, if you have the means to make a purchase, you should do so now, before the FHA Housing Credit expires.

Need more convincing that now is the time to act? The FHA housing credit now provides you with a new ability to borrow against the credit you receive. So instead of having to wait until the deal goes through, you can borrow money upfront so you can get started with your home renovation projects, moving costs, or what have you.

The important thing to keep in mind is that while purchasing a home is a costly endeavor, there are numerous expenses that aren’t included in your mortgage. Like I said, the cost of moving, fixing up the home, buying appliances and other costs add up quickly and can be next to impossible to deal with if you don’t have a sizeable savings.

So, instead of going it alone and dealing with the expenses one your own, why not take advantage of the upfront FHA housing credit before it expires this December? It won’t cost you a penny and you can get settled in your new home much faster than you would have if you’d been forced to piecemeal your initial costs over time. Using this once-in-a-lifetime tax credit now gives you the unique opportunity to borrow against the credit right away, before you even move into your new home. To make a long story short, when else will you have an opportunity like this one right at your fingertips?