The Obama Financial Regulatory Reform Plan, announced on June 17, 2009, would change the regulation of all lenders and their holding companies, give the Federal Reserve Board supervisory power over large and complex entities that pose a systemic risk to the financial system, create a new consumer protection agency, and provide for managing future financial crises. Key objectives include restoring consumer and investor confidence in the nation's financial system. Of particular interest to REALTORS®, the plan would strengthen the national policy against mixing banking and commerce and create a Consumer Financial Protection Agency to consolidate the regulation of consumer protection laws related to mortgage loans and other financial products, including the Truth in Lending Act and the Real Estate Settlement Procedures Act
.NAR Summary of the Plan
White House Press Release (including links to White Paper and Fact Sheets)
Monday, June 22, 2009
Wednesday, June 17, 2009
Condo Developers Seek Out FHA Approval
Getting building-wide approval from the Federal Housing Administration is an increasingly popular way for builders to sell condos.The nationwide glut of new condos has made selling condo units a challenge, especially since Fannie Mae and Freddie Mac have tightened guidelines on condo mortgages. But if the entire building has the FHA sign-off, then buyers can get a mortgage in as little as two weeks with a down payment as low as 3.5 percent.To get FHA approval, developers must include a 10-year structural warranty and a reserve fund. Condo boards must waive the right to refuse potential buyers. In buildings with more than 30 units, no more than 10 percent can be financed with FHA loans. In buildings with 30 or fewer units, no more than 20 percent can be FHA financed.As hard as it is to sell condos now, the situation could still get worse, says real estate research firm Reis Inc. More than 93,000 new units are scheduled for completion this year, a 28 percent increase over last year.Source: The Wall Street Journal, Nick Timiraos (06/17/2009)
Tuesday, June 9, 2009
Monday, June 8, 2009
How to Use the Tax Credit for Downpayments
Potential first-time buyers have yet another reason to consider purchasing a home: the monetization of the tax credit. Here are four ways your clients can get access to those funds for upfront costs.
By Robert Freedman
June 2009
Short-term bridge loans are now available from a variety of lenders so that buyers can tap the benefits of the $8,000 Federal Housing Tax Credit for First-Time Home Buyers upfront. If your clients are eligible for the tax credit, these bridge loans will enable them to use the money for their down payment and closing costs with the credit as collateral. Consumers will have to pay the money back after they’ve filed their tax return and received a refund.
There are essentially four sources for this type of financing, and their terms can vary considerably.
1. State HFA Bridge Loans
As of early June 2009, 10 state Housing Finance Agencies offered tax-credit bridge loans, and more were planning to do so. The easiest way to learn whether one is offered in your state is to get your HFA’s phone number through a Housing Finance Agency list maintained by the National Council of State Housing Agencies (NCSHA). NCSHA also maintains a list of HFAs that already offer the bridge loans. The HFAs with loan programs already in place are Colorado, Delaware, Idaho, Kentucky, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania, and Tennessee.
If your state HFA offers the loans, you should be able to get more information about them on the agency’s Web site. Look for “tax credit advance loan” or some variant of that, or else look for information on the HFA’s regular mortgage program, which should include info on the tax-credit advance loan somewhere. Although each state HFA loan differs, here are some typical characteristics:
You’ll need to make a minimum downpayment from your own funds, probably around $1,000.
You’ll have to go through local lenders approved by the HFA to actually originate the loan, since HFAs are not originators.
In some cases, the loans are interest-free; check with the state HFA to find out.
The HFAs have set aside a limited amount of funds for the loans, so they tend to be made on a first-come, first-served basis.
You’ll be expected to use HFA-backed financing for the mortgage on your home purchase. This financing typically comes with a below-market interest rate and usually requires borrowers to meet eligibility criteria. These criteria will vary greatly, but they often require borrowers to be first-timer buyers and meet income-eligibility requirements. For the bridge loans, there’s a good chance the criteria will be similar to what’s required for the tax credit.
Since the bridge loans are made in tandem with your HFA’s financing products, you apply for the loans when you apply with the HFA-approved lender for your mortgage financing. You should be able to find a list of approved lenders on the HFA’s Web site.
2. Local Government or Nonprofit Loans
If your state HFA doesn’t offer the loans, you can ask an HFA staff person to direct you to local nonprofits or state or local government agencies that do. If that person can’t help you, a good place to start a search is with a national nonprofit group called NeighborWorks, which maintains a list of more than 200 local affiliates that provide housing assistance. The loan programs for each of these affiliates differ, so you or your client will need to check with them on their underwriting standards and loan terms—and even on whether they make bridge loans repayable with the tax credit.
3. Local HFAs
Another source, if your state HFA can’t help you, might be the National Association of Local Housing Finance Agencies. Local HFAs are much like state HFAs but with jurisdictions limited to their locality. To learn whether there’s a local HFA in your area, call NALHFA at 202/367-1197.
4. FHA-approved Lenders
If you’re unable to identify a state or local HFA or other governmental agency or nonprofit to assist you, you can tap bridge-loan assistance if you work with a lender approved by the U.S. Department of Housing and Urban Development to originate FHA-backed loans. HUD maintains a database of FHA lenders on its Web site that’s searchable by a number of criteria including city, state, county, and service area.
In a difference with the assistance provided by state and local agencies or nonprofits, the bridge loans provided by private, for-profit FHA-approved lenders must be structured in the form of a personal loan or line of credit collateralized by the tax credit. The bridge loan can’t be structured as a second mortgage.
Also, although FHA allows you to use the bridge loan to cover your closing costs or to buy down your interest rate, you can use it for the down payment only after you’ve covered the 3.5 percent minimum that’s required on any FHA loan. Thus, you’ll have to come up with the 3.5 percent minimum down payment yourself or else tap another source of assistance for it. That can include gifts from family. Seller-funded down-payment programs are not permitted. HUD provides complete details in a May 29 Mortgagee Letter on “Using First-Time Homebuyer Tax Credits” (2009-15) that went to its approved lenders.
Since it’s the HUD-approved lender and not FHA itself that’s making the bridge loan, actual loan terms will vary. At a minimum, though, the bridge loan must meet certain restrictions, most of them imposed to weed out fraud or ensure borrowers aren’t getting in over their heads. These include:
Loans can’t result in cash back to the borrower.
The amount can’t exceed what’s needed for the downpayment, closing costs, and prepaid expenses.
If there’s a monthly repayment, it must be included within the qualifying ratios and, when combined with the first mortgage, can’t exceed the borrower’s reasonable ability to pay.
Payments must be deferred for at least 36 months to not be included in the qualifying ratios.
There can be no balloon payment required before 10 years.
Start with the Deepest Assistance First
Since state HFA bridge loans are typically allowed for as much of the downpayment as possible (up to the credit limit of $8,000), your client’s best bet is to start with the state HFA. If it doesn’t have a program in place, learn what you can from it about other state or local programs, including nonprofits. If these sources don’t pan out, your buyer can work with an FHA-approved lender. However, since HUD requires borrowers to put down a minimum of 3.5 percent, they can access bridge-loan assistance only for other upfront expenses such as closing costs, an interest-rate buy-down, or a portion of the downpayment above 3.5 percent.
By Robert Freedman
June 2009
Short-term bridge loans are now available from a variety of lenders so that buyers can tap the benefits of the $8,000 Federal Housing Tax Credit for First-Time Home Buyers upfront. If your clients are eligible for the tax credit, these bridge loans will enable them to use the money for their down payment and closing costs with the credit as collateral. Consumers will have to pay the money back after they’ve filed their tax return and received a refund.
There are essentially four sources for this type of financing, and their terms can vary considerably.
1. State HFA Bridge Loans
As of early June 2009, 10 state Housing Finance Agencies offered tax-credit bridge loans, and more were planning to do so. The easiest way to learn whether one is offered in your state is to get your HFA’s phone number through a Housing Finance Agency list maintained by the National Council of State Housing Agencies (NCSHA). NCSHA also maintains a list of HFAs that already offer the bridge loans. The HFAs with loan programs already in place are Colorado, Delaware, Idaho, Kentucky, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania, and Tennessee.
If your state HFA offers the loans, you should be able to get more information about them on the agency’s Web site. Look for “tax credit advance loan” or some variant of that, or else look for information on the HFA’s regular mortgage program, which should include info on the tax-credit advance loan somewhere. Although each state HFA loan differs, here are some typical characteristics:
You’ll need to make a minimum downpayment from your own funds, probably around $1,000.
You’ll have to go through local lenders approved by the HFA to actually originate the loan, since HFAs are not originators.
In some cases, the loans are interest-free; check with the state HFA to find out.
The HFAs have set aside a limited amount of funds for the loans, so they tend to be made on a first-come, first-served basis.
You’ll be expected to use HFA-backed financing for the mortgage on your home purchase. This financing typically comes with a below-market interest rate and usually requires borrowers to meet eligibility criteria. These criteria will vary greatly, but they often require borrowers to be first-timer buyers and meet income-eligibility requirements. For the bridge loans, there’s a good chance the criteria will be similar to what’s required for the tax credit.
Since the bridge loans are made in tandem with your HFA’s financing products, you apply for the loans when you apply with the HFA-approved lender for your mortgage financing. You should be able to find a list of approved lenders on the HFA’s Web site.
2. Local Government or Nonprofit Loans
If your state HFA doesn’t offer the loans, you can ask an HFA staff person to direct you to local nonprofits or state or local government agencies that do. If that person can’t help you, a good place to start a search is with a national nonprofit group called NeighborWorks, which maintains a list of more than 200 local affiliates that provide housing assistance. The loan programs for each of these affiliates differ, so you or your client will need to check with them on their underwriting standards and loan terms—and even on whether they make bridge loans repayable with the tax credit.
3. Local HFAs
Another source, if your state HFA can’t help you, might be the National Association of Local Housing Finance Agencies. Local HFAs are much like state HFAs but with jurisdictions limited to their locality. To learn whether there’s a local HFA in your area, call NALHFA at 202/367-1197.
4. FHA-approved Lenders
If you’re unable to identify a state or local HFA or other governmental agency or nonprofit to assist you, you can tap bridge-loan assistance if you work with a lender approved by the U.S. Department of Housing and Urban Development to originate FHA-backed loans. HUD maintains a database of FHA lenders on its Web site that’s searchable by a number of criteria including city, state, county, and service area.
In a difference with the assistance provided by state and local agencies or nonprofits, the bridge loans provided by private, for-profit FHA-approved lenders must be structured in the form of a personal loan or line of credit collateralized by the tax credit. The bridge loan can’t be structured as a second mortgage.
Also, although FHA allows you to use the bridge loan to cover your closing costs or to buy down your interest rate, you can use it for the down payment only after you’ve covered the 3.5 percent minimum that’s required on any FHA loan. Thus, you’ll have to come up with the 3.5 percent minimum down payment yourself or else tap another source of assistance for it. That can include gifts from family. Seller-funded down-payment programs are not permitted. HUD provides complete details in a May 29 Mortgagee Letter on “Using First-Time Homebuyer Tax Credits” (2009-15) that went to its approved lenders.
Since it’s the HUD-approved lender and not FHA itself that’s making the bridge loan, actual loan terms will vary. At a minimum, though, the bridge loan must meet certain restrictions, most of them imposed to weed out fraud or ensure borrowers aren’t getting in over their heads. These include:
Loans can’t result in cash back to the borrower.
The amount can’t exceed what’s needed for the downpayment, closing costs, and prepaid expenses.
If there’s a monthly repayment, it must be included within the qualifying ratios and, when combined with the first mortgage, can’t exceed the borrower’s reasonable ability to pay.
Payments must be deferred for at least 36 months to not be included in the qualifying ratios.
There can be no balloon payment required before 10 years.
Start with the Deepest Assistance First
Since state HFA bridge loans are typically allowed for as much of the downpayment as possible (up to the credit limit of $8,000), your client’s best bet is to start with the state HFA. If it doesn’t have a program in place, learn what you can from it about other state or local programs, including nonprofits. If these sources don’t pan out, your buyer can work with an FHA-approved lender. However, since HUD requires borrowers to put down a minimum of 3.5 percent, they can access bridge-loan assistance only for other upfront expenses such as closing costs, an interest-rate buy-down, or a portion of the downpayment above 3.5 percent.
Friday, June 5, 2009
Existing Homes Sales Rise for April
The National Association of REALTORS today reports that existing homes sales increased in April, particularly for lower cost homes. According to NAR, 4.68 million single-family, townhomes, condominiums, and cooperatives sold in April. This represents a 2.9 percent increase (seasonally adjusted) over March but still below the 4.85 million unit-level of April 2008. Distressed properties accounted for 45 percent of all sales and, according to NAR, this continues to distort median sales price, which is down more than 15 percent below 2008.
Chief Economist, Lawrence Yun, said “Because foreclosed properties will likely be released into the market over the rest of year, it is critical that distressed homes be quickly cleared from the market." Mr. Yun also called on the Federal Reserve to restore liquidity to the jumbo market by purchasing these loans under TALF.
Chief Economist, Lawrence Yun, said “Because foreclosed properties will likely be released into the market over the rest of year, it is critical that distressed homes be quickly cleared from the market." Mr. Yun also called on the Federal Reserve to restore liquidity to the jumbo market by purchasing these loans under TALF.
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