Fannie & Freddie incentives for buyers & agents.

Fannie Offers Incentives for HomePath Properties
On April 11, 2011, Fannie Mae announced new buyer and selling agent incentives in connection with the sale of Fannie Mae-owned properties (HomePath properties).
A buyer of a HomePath property to be used as the buyer’s primary residence can receive up to 3.5% of the final sales price to be used toward closing costs.
A selling agent bonus is available in four states—California, Washington, Arizona, and Texas. In these four states, a bonus is being offered to selling agents who represent a buyer who will use the property as a primary residence. For properties in California and Washington, the selling agent bonus is $1,000. For properties in Arizona and Texas, the bonus is $500.
To qualify for either incentive, the buyer and, for properties in one of the four states, the selling agent must meet certain requirements, including the following. The buyer and selling agent incentive must be requested at the initial offer submission. The initial offer must be submitted on or after April 11, 2011, and the property sale must close on or before June 30, 2011. The buyer must use the property as a primary residence (auction, pool and investor sales are excluded). Check the HomePath website for more details. If you have questions, please CONTACT Jeff Lischer at 202-383-1117 or jlischer@realtors.org with any questions.


NAR Pres. Elect Moe Veissi Talks Turkey at CAR Mid-Winter

Take-aways from our recent California Association of Realtors Mid-winter meetings.

From NAR President-elect Moe Veissi –

Six of the past eight recessions have ended due to increasing strength in the housing market. The other two were due to wars. That seems like an easy choice. We need to get behind housing. This battle against housing is counterproductive and the attack on the mortgage interest deduction is an attack on one of the basic foundations of the American Dream.

Similarly we should seek to preserve the basics of the GSE’s.They can certainly be improved upon but their services are vital to home buyers. They provide a foundation and critical financial instruments that allow many people to buy homes that otherwise would not be able to. Keep in mind that during the height of the meltdown, Fannie and Freddie had take-back rates of about 3 1/2% while at the same time banks like B of A and Wells were taking back 15% to 18%.

You hear people today who don’t know the history, who don’t know any better – oh, Canada doesn’t have a 30 year fixed mortgage and their housing market is great. Oh, Europe doesn’t have a Fannie/Freddie and their market is great. The fact is, their markets don’t compare with ours. Never have. Nobody does it like us. These other countries are trying to figure out how to do it like we do and we’re trying to figure out how to kill our system and adopt the systems others are trying to get rid of. So why would we try to emulate markets with which we have nothing in common? Why would we destroy 100 years of success to become more like an inferior market? It just doesn’t make sense.

These are not short term problems we are dealing with and they will keep rearing their heads. We have saddled ourselves with tremendous debt so attacks on basic and short term sources of tax revenue will be ongoing. Don’t believe them when they tell you – oh, we aren’t going to take it all away. Just this little bit. Yeah, just that little bit this time. Then  a little more, then a little more, you know how that works.

Realtors just don’t realize the power we have in our communities and our country. But we’ve got to stand up and be counted if we want to be heard. We need to present Congress with 1/2 million Realtor calls on issues instead of 100,000. When we can consistently deliver 1/2 million member voices or more to our Congressional leaders, they will know we mean business.


2010 NAR Public Policy Accomplishments

Throughout 2010, NAR made significant progress educating Congress and the Obama Administration that a stable and sustainable housing market is the primary building block for any economic recovery. NAR had a series of successes in the regulatory and legislative fields, some of which are highlighted below.

As we look ahead to 2011, NAR will continue to advocate policy initiatives that benefit REALTORS® and consumers in the residential and commercial real estate industry.

PROTECTING REALTORS®’ BUSINESS INTERESTS AND ACTIVITIES
Wall Street Reform and Consumer Financial Protection – On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act of 2010. This comprehensive reform of the nation’s financial services sector is the most sweeping since the financial reforms ushered in during the Great Depression. NAR worked with both Democrat and Republican members of the House and Senate committees responsible for the legislation to secure a “real estate professional exclusion” ensuring that the daily business of REALTORS® was not negatively impacted by this historic piece of legislation.

Me etings with Lenders – Starting in the summer of 2010, NAR’s elected leadership initiated a series of meetings with large lenders and servicers to discuss issues of concern for REALTORS®. The topics included origination issues (underwriting standards, appraisal issues, credit policy, condo financing); short sales; bank-owned properties; and the impact of the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act. NAR and the banks are discussing how we can work together to make significant improvements in all of these areas. The goal is to increase our mutual success and help support market recovery.

Health Insurance Reform – NAR successfully raised the profile of the challenges that face the self-employed and small employers, including REALTORS®, throughout the 111th Congress’ debate over health care reform. As a result, the underwriting and rating reforms in the final bill — guaranteed issue policies, ban on pre-existing condition exclusions, limited age rating, etc. — are in line with NAR’s policy principles and will give the self-employed access to insurance with most of the characteristics of a group plan. In addition, individual affordability credits and tax credits for small employers will help to make health insurance more affordable for many NAR members who are currently uninsured.

SUSTAINING HOUSING OPPORTUNITIES
First-Time Homebuyer Tax Credit – In November 2009, the $8,000 credit was again extended for purchasers through April 30, 2010. Those under contract by April 30 retained eligibility for the credit, so long as the transaction closed before July 1, 2010. An additional $6,500 credit was created for current homeowners purchasing a new or existing home between November 7, 2009 and April 30, 2010. These buyers were also subjected to the July 1, 2010 settlement requirement. In June 2010, NAR noticed that many purchasers who had signed contracts on or before April 30 were unable to close their transactions, particularly in short sales. At NAR’s urging, Congress extended the closing date requirement through September 30, 2010.

Protecting the Mortgage Interest Deduction – The Administration’s proposed budgets for Fiscal Years 2010 and 2011 included a recommendation that health insurance reform be “paid for” by limiting the value of the mortgage interest deduction (MID) and other itemized deductions for upper income taxpayers. The limitation proposal was based on an individual’s tax bracket. Itemized deductions for individuals in tax brackets above 28% would have not have received the value of their higher tax brackets. Rather, the “value” of itemized deductions would have been limited to 28 cents on the dollar, rather than the 33 cents or 35 cents to which they would have otherwise been entitled. NAR aggressively and successfully fought off changes to the MID through grassroots, advertising and similar advocacy tools.

FHA and GSE Loan Limits – NAR successfully advocated for legislation to once again extend the temporary higher loan limits for FHA and the GSEs in both 2009 and 2010. Had the limits expired, NAR estimates that more than 612 counties in 40 states and the District of Columbia would be negatively impacted, with an average decline in loan limits of more than $50,000. The current limits (at the greater of $271,050 [for FHA] and $417,000 [for the GSEs] or 125% of local area median up to $729,750) are now in place through September 30, 2011.

SUSTAINING COMMERCIAL REAL ESTATE OPPORTUNITIES
Small Business Lending Fund – On September 27, 2010, the Small Business Jobs and Credit Act of 2010 (H.R. 5297) was signed into law. Under this bill, which NAR supported, the U.S. Treasury is authorized to lend up to $30 billion to interested community banks to further expand lending to small businesses. As an incentive for community banks to participate and increase small business lending, participating banks’ interest rates will be adjusted relative to the amount of their small business lending activity. It is estimated that community banks could use the $30 billion lending fund to leverage up to $300 billion in new loans to small businesses. Additionally, NAR successfully worked to include provisions in the legislation that enhance Small Business Administration (SBA) programs and provide $12 billion in tax relief for commercial real estate practitioners and small businesses.

ELIMINATING BARRIERS TO CREDIT
Flood Insurance – NAR secured a full one-year extension through September 2011 of National Flood Insurance Program (NFIP) authority, after supporting legislation, which twice broke congressional stalemates that led to multi-week shutdowns of the program. Without the program, thousands of property owners in tens of thousands of communities across the U.S. would not have been able to obtain the insurance necessary for them to obtain a mortgage in federal-designated floodplains.

Development of NAR Credit Policy – The Conventional Finance and Lending Committee proposed a NAR Credit Policy for consideration by the Board of Directors in November 2010 which was approved. The new policy calls for the lending industry to reassess and amend its credit policies to increase mortgage liquidity for qualified home buyers, including low and moderate-income families and first-time home buyers. The policy also includes specific recommendations.

Appraisal Reform – On July 21, 2010, the President signed into law the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act. The legislation includes the first major appraisal reforms in more than a generation. NAR worked with Congress on this legislation, which regulates appraisal management companies (AMCs), establishes new appraisal independence standards, and regulates automated valuation models (AVMs) and broker price opinions (BPOs). The legislation also sunsets the Home Valuation Code of Conduct (HVCC). NAR is currently working with the Federal Reserve on the implementation of regulations related to appraisal independence, which must be implemented within 90 days of enactment of the legislation.


Meet the new HVCC, same as the old HVCC

Fannie Mae and Freddie Mac Unveil New Appraisal Independence Standards


On October 15, 2010, the government sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, announced appraisal independence requirements to replace the Home Valuation Code of Conduct. The new requirements offer no significant changes to the core principles of HVCC. An appraiser may not be selected or retained by mortgage brokers and real estate agents. More specifically, lenders mortgage production staff, any person compensated on a commission basis upon the successful completion of the mortgage, and any person whose immediate supervisor is not independent of mortgage production staff, is prohibited from ordering the appraisal. Lenders must still separate mortgage production functions from appraisal functions. The borrower is entitled to a copy of the appraisal report no less than three days prior to closing. The new standards include language permitting appraisal portability assuming the appraisal continues to meet the independence standards.

Fannie Mae Appraiser Independence Requirements >
Fannie Mae Announcement SEL 2010-14 >
Freddie Mac Appraiser Independence News Release >
Freddie Mac Bulletin 2010-23 >


Fannie Putting Some Teeth to Strategic Defaults. Anybody Scared?

Up until now about the only thing preventing millions of homeowners from strategically defaulting on their home was the moral dilemma many of them faced. With as many as 1/3 of the nations 45 million homeowners currently upside-down in their homes (owing more than they can sell it for), lenders fear that a 3rd (or 4th, depending on how you keep track) wave of foreclosure activity could be launched by millions of owners simply walking away. They can afford to make the payments but the strategic argument is that they can re-build their credit and build equity in a new home faster than they can recover the lost equity in their homes – especially if it’s $200,000, $400,000 or more.

The position has been detailed in a much-hyped white paper by University of Arizona Professor Brent White which I explored some time back in Social Control of the Housing Crisis vs Strategic Default. It can be a tough argument to refute – when somebody is making payments on a home they bought for $600,000 while their neighbor just bought the same property as an REO for $285,000. The only thing keeping them there is the sense of moral obligation because they are honorable folks who signed a contract and gave their commitment that they would. At what financial point does that moral obligation start to break down? And if you can make the argument that the lenders themselves had some culpability in the run-up and subsequent collapse (an argument that is pretty easily made), then does that provide even further justification for underwater homeowners to simply bail?

teethNow Fannie Mae has decided to ‘put some teeth’ into their enforcement and take some pre-emptive action on strategic defaults in what they’re terming a ‘get tough’ strategy. They have notified their lenders that effective next month they should begin monitoring loans facing foreclosure and issuing recommendations in cases that might constitute strategic default for possible pursuit through deficiency judgments. Of course deficiency judgments only work in states that allow such a thing. California doesn’t so that avenue is closed off to them here. They can still pursue deficiency judgments here if the owner re-fi’d but the California Association of Realtors is looking to shut down that avenue as well with SB1178, which just passed the Senate and is working through the Assembly as we speak. Of course as I’ve explained that one before, if you did a cash-out refi, you’ll still be on the hook but if you re-fi’d just to get a better interest rate you’ll dodge another bullet the lenders are aiming your way.

So what else has Fannie got up there sleeve for this get-tough policy? Well, if it appears you exercised a strategic default then Fannie will not guarantee anothernloan for you for 7 years. As of right now, the policy is if you exercise your options for a loan-mod, short-sale or deed-in-lieu, and can show extenuating circumstances (job loss, illness or divorce), then Fannie might give you a new loan in as little as 2-3 years with 10% down, 20% down if you exercised your options but have no extenuating circumstances.

teethIs that enough get-tough toothiness to make a difference? Well, if Freddie joins in it could be. With the government backing or directly involved in 95% of the mortgage market today, that could be sufficient incentive to try to work within the system instead of dumping on the system. Innstates where there is recourse it’s even tougher – although there’s a reason why most lenders avoid judicial foreclosure as an option today. It’s expensive and time consuming and leaves savvy homeowners in their homes free far longer than otherwise. With the nationwide average already running 18 months, does Fannie really want to stretch that out even more?

Well, I certainly don’t have the answers to that – it’s tough enough coming up with the questions. Having just gone through an exercise in financing myself, I can’t imagine a much more exhausting, convoluted scenario of an industry in disarray. Then you have to wonder if Fannie will even be here next year or if this is just a last ditch effort to forestall the wave that would put them under.

If you’re $400,000 upside-down in your home I’d love to hear what you think and why you’re gritting it out.


FHA Commissioner Dave Stevens Speaks. WE made the mess. THEY'll clean it up. Oboy.

dave stevensThis morning we were treated to an hour long conference call with FHA Commissioner Dave Stevens, courtesy of NAR. Long-time readers know I’m a fan of Stevens, even got a nice comment from him on a blog I wrote last fall following his address at NAR. I think it’s a good thing to have somebody in his position who actually knows real estate, knows what it takes to sell a house, get a mortgage, work a short sale, etc. As introduced this morning, they said it’s ‘refreshing to have someone who knows our industry.’ I concur.

Stevens started his talk saying these are ‘unprecedented times’ in the housing industry. ‘The good news is that the housing industry has never received this much attention. The bad news is that the housing industry has never received this much attention.’ The housing industry brought the U.S. economy to it’s knees and nearly took the world economy with it.  We had a severe hiccup when people lost sight of housing as shelter and started viewing it as an investment strategy.

He then ran through some of the stats that most of us are aware of. Exotic mortgages nearly wiped out the FHA base. With their 3% down, 30 year fixed mortgages they were too boring, couldn’t complete with ‘0’ down, no interest, no doc loans – they were irrelevant and shrank to less than 3% of the market. Today they are back up to 30+% and growing. They originate 50% of loans to Blacks, 45% of loans to Hispanics and 80% of loans to 1st time homebuyers.

He also talked about some of the changes FHA has made to protect their base things like increasing the down payment amount in for some buyers and decreasing the amount of seller contributions. He noted those things are vital to protect FHA and he quoted numerous studies showing the rise in failure rates between buyers getting 3% seller contributions and those getting 6%. He also talked about the SAFE Act, which he believes will go a long ways toward eliminating the type of ‘rogue’ lender that contributed so much to questionable lending. He sees this as a good step toward rebuilding consumer confidence in the market.

He also stated that, in hindsight, it’s clear that everybody should not have become homeowners as was the mantra for the first half of the decade, and through their policies they intend to make sure everybody doesn’t become a homeowner going forward – only those who should be, who can demonstrate the fiscal ability to meet the responsibility they are undertaking. He realizes that some of the policies sound harsh and that some innocent people will be hurt, but in the interest in returning credibility, confidence and integrity to the market, these are steps that need to be taken. And with 95% of the financial market under the control of the Federal Government, they are in a position to set those rules.

And for the most part I find myself in agreement with what Stevens said – up to a point. He started losing me when he said that the belief in Washington is that THEY  need to act to restore confidence in the market because WE failed. WE collectively built this market – all of us, according to Stevens, but it is the Obama administration that now sees the mandate to ride to the rescue. He credits this administration with stabilizing the market at a time it was in free-fall. He believes the HAMP & HARP and other programs have been resounding successes and that without them the crisis would have gotten much worse.

That’s all partially true but it strikes me that in some respects Dave has been drinking the Kool-Aid. And that’s OK – I mean he works for the administration and his job depends on toeing the company line on this kind of stuff – just don’t expect everybody else to believe it without question. And we were all too polite to question it on the call this morning.

I just sent out my monthly newsletter in which I pretty much said the same thing Stevens did about it being a unique market and that the government has their finger in darn near every aspect of the market. Where we diverge is that while Stevens thinks more government intervention and manipulation is a good thing, I think it has artificially propped the market up and has kept us from a true stabilization, reaching a real bottom and starting a sustainable recovery. We simply don’t know what the government is going to do next – and that creates instability – especially when the  majority of people don’t have much confidence in that government.

As Ben Bernanke recently commented to the Dallas Regional Chamber, “We have yet top see evidence of a sustained recovery for the housing market. Mortgage delinquencies for both prime and sub-prime loans continue to  rise as do foreclosures.”

It’s cyclical. The market would never have peaked as high or as boisterously as it did without government intervention. When Barney Frank and Bill Clinton decided everybody who could fog a mirror should buy a house, the die was cast. When the financial markets, including the GSE’s responded with vigor and with increasingly exotic products and Barney Frank and George W encouraged it, we were toast and didn’t know it. So when Stevens said WE built this market, he should have expanded his collective WE to include all the federal cronies who are now charged with straightening out the mess they helped create in the first place. Dave didn’t mention that.

Oh well,. As always, we at the street level are left to deal with what plops in steaming piles from the bowels of Congress. Thus has it always been. Obama didn’t create the mess and he sure as heck ain’t cleaning it up, though when the cycle ultimately turns you can bet he’ll be leading the parade to take credit for it. The rest of us will just keep working and trying to eke out a living and stashing as much as we can before higher taxes and interest rates take it. That’s the fun part. As Dave Stevens closed today he quoted that thing that makes each of us get up in the morning and do what we do – “We still own the American Dream business.” Well, at least the part the administration doesn’t lay claim to.

The opinions expressed in this article are those of the author and do not represent the official position of anybody who matters.
If you don’t like it (Martin), don’t read it – but quit yer whinin’. OK?


Short sale & Deed-in-Lieu Incentives & Guidelines

On November 30, The U.S. Treasury Department released guidelines and forms for its new Home Affordable Foreclosure Alternatives Program (HAFA), which is part of the Home Affordable Modification Program (HAMP).  HAFA will provide incentive in connection with a short sale or a deed in lieu of foreclosure used to avoid foreclosure on a loan eligible for modification under the HAMP program.  HAFA applies only to loans not owned or guaranteed by Fannie Mae or Freddie Mac as they will be issuing their own version of this program in a few weeks.

NAR staff has reviewed the aspects of the program and prepared a brief on the intricacies in hopes to make it more understandable.  To view more information about HAFA, visit the mail page of the REALTOR® Action Center:  www.realtoractioncenter.com.  To get more information on short sales, visit the short sales page on REALTOR.org: http://www.realtor.org/realtors/basics_short_sales.


Social Control of the Housing Crisis vs. Strategic Default

Brent T. White, an Associate Law Professor at the University of Arizona, has published a 50+ page paper on why he believes homeowners who are upside down in their mortgages should just walk away. It’s an interesting piece and, while I don’t agree with some of his hypothesis and conclusions, he does have some valid points.

You can read the whole paper here and I would love to hear your comments. I know we are seeing more ‘strategic defaults’ in our area and there are those that are voicing concern that a new wave of these may derail the fragile recovery we are seeing.

Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis

White essentially boils the argument down to a ‘logic vs emotion’ basis and posits that the reason people aren’t taking the smart alternative and walking away in droves is because we are being socially conditioned or worse – socially controlled – to stay in our homes even when it makes no sense. A vast government/lender/media conspiracy is convincing us it’s not the right thing to do morally or ethically and we should just continue to suck it up and pay off our underwater loans.

According to White, our emotions are being played like a fine fiddle by what he calls “the social control of the housing crisis” — pressures and messages continually sent to consumers by the “social control agents,” namely banks, government and the media. The mantra that these agents — all the way up to President Obama — pound into owners’ heads is that “voluntarily defaulting on a mortgage is immoral.”

White says: Banks set the rules during the housing boom, handing out home loans with no down payments, no income checks and inflated appraisals. Now that property values have dropped 20% to 50% in many areas, banks have been slow to modify troubled mortgages and reluctant to reduce principal debts. Only when homeowners cut through the emotional fog and default strategically in large numbers will this inequitable situation be seriously addressed.

How does White’s 54 page manifesto go over with mortgage lenders? Predictably, not well. Officials at Fannie Mae and Freddie Mac – investors who fund the bulk of all new mortgages in the country – disputed White’s characterization of how quickly after foreclosure a walkaway borrower can obtain a new loan. It’s a minimum of five years, not three, absent extenuating circumstances such as medical or employment problems that caused the foreclosure. “Borrowers who walk away from their mortgage obligations face serious consequences,” including severely depressed credit scores for extended periods, said Brian Faith of Fannie Mae. In addition, he said, “there’s a moral dimension to this as homeowners who simply abandon their homes contribute to the destabilization of their neighborhood and community.”

I know we advise homeowners to try loan mod 1st, short sale if that doesn’t work and foreclosure as a last resort if all else fails. Are we doing our clients a disservice? According to White, who obviously dwells in the halls of academia and not so much the real world, we are. What do you think


Fannie Mae Announces'First Look' Program – May help buyers.

On November 24 Fannie Mae launched their ‘First Look’ program which, if applied as intended, could prove to be a real value to frustrated homebuyers in many areas. Prospective homebuyers in our area have suffered through much of this year seeing offer after offer go begging as homes are sold to investors with cash. Adding to that frustration, many times the accepted offers net the seller (bank) less than their offer would have but cash has been king.

As encouraging as this program sounds, it will remain to be seen what impact it has on the market. If Fannie operates in good faith, accepts an offer from an individual or public entity during that 15 day window and consummates the transaction, it will be good. If Freddie & the FHA follow suit it will be even better.

However, if they just accept offers for 2 weeks and then throw  the door open to investors to see if they get a better offer – then it’s pretty much business as usual with no real benefit accruing to the buyers.

For the full text and particulars, click here:

Fannie Mae Supports Neighborhood Stabilization Through “First Look” Initiative

First Look, Other Benefits for Owner Occupants and Buyers Using Public Funds

WASHINGTON, DC — Fannie Mae (FNM/NYSE) today announced that the company has launched several initiatives supporting neighborhood stabilization and promoting home purchases by owner occupants and buyers qualifying for public entity housing programs.

To provide owner occupants and public entities an advantage in purchasing Fannie Mae-owned foreclosed properties, the company has created the First Look initiative. With First Look, only offers from owner occupants and buyers using public funds are considered during the first 15 days a property is on the market. Offers from investors will be considered only after the first 15 days have passed.

Meanwhile the City of El Cajon, CA has had a similar program in place for awhile now and has created a checklist to use to expedite the buying process. To download a PDF of what your buyer needs to know – click here:

Fannie Mae First Look Acquisition Checklist.