Interest Rates

INTEREST RATES



Considering all of the action that went on last weekend, rates have
responded positively. With the nationalization of the two mortgage
giants Freddie Mac and Fannie Mae, the government showed its most
aggressive action taken to date to go along with the bill that has come
out of Congress recently, the President signing it whole heartily and
the Fed and its continued stance with the federal funds rate. Rates on
most programs are down however the 30yr fixed saw the most decline, some
of which was given back towards the end of the week, yet still below
previous highs.



The basics behind why this has happen is twofold. First the market as a
whole as saw the nationalizing of Freddie and Fannie as a positive in
that it stabilized the two largest holders of mortgages in the world. If
they would have gone down some believe that it would have been
catastrophic to our economy and others. Secondly, the difference in the
yield between a 10yr US treasury note and a mortgage backed security
(MBS) issued by Fannie Mae began to shrink. Usually the MBS trades at a
slightly higher premium than the 10yr t-note. Since the "mortgage
crisis" started about a year ago or so the premium has increased as the
crisis worsened. Now however, that spread between the two is decreasing
due to the simple fact that both are now backed by the US Government. So
the question is what is the difference between the two?



Currently the MBS has a higher yield than the 10yr t-note so some
believe investors may turn their attention to the MBS and away from the
10yr note. Typically you could follow the ebb and flow of the 10yr
treasury note and get a pretty accurate feel on what was going to happen
to rates. Now we may see the yield on the 10yr raise while rates drop.
This as the yield on the MBS drops and closes the gap on the spread
between the two. So now the question that your probably thinking is, "
What the heck does all this mean to me??"



Well, some "experts" feel that this balancing of the two securities will
mean rates in the low 5% range in the foreseeable future. With home
prices where they are and rates in that range we could see more and more
people becoming buyers again. Of course this is all speculative and in
fact some "experts" think that the above means nothing and that mortgage
rates will continue their movement within a .5% to 1% range.



Whatever you believe, we still have historically low rates and to quote
someone else, it could be hazardous to your clients financial health to
pass up a rate in the low 6 or high 5% range just to try and get 5.25%.
When I moved to Phoenix to begin my career out here rates were at 8.5 -
9.0% , and that was only January of 1999. If that gives you any
perspective.



Hope this helps. Please feel free to contact me if you have any
questions.



Heidi

Backlash over Housing Bill

Washington Report: Backlash over Housing Bill

by Kenneth R. Harney

The ink from President Bush's signature on the 2008 housing bill was barely dry when the first critical backlashes began circulating in Washington.

Most ominous of all: Doubts about whether HUD will be able to complete the operating rules and regulations for the centerpiece of the entire legislation -- the $300 billion foreclosure-relief program -- by the October 1 starting date mandated by Congress.

Unnamed HUD sources had been quoted earlier in the week saying that it would be almost impossible for the agency to have the complicated and extensive underwriting criteria required to run the program in final form that quickly.

That, in turn, would delay Congress's efforts to reach out and save up to 400,000 deeply distressed home owners by refinancing them into affordable, fixed-rate FHA loans.

The Democratic chairmen of the Senate and House committees that authored the "HOPE" refinancing program were incensed that HUD couldn't produce the operating rules in a more timely manner.

"The notion that this takes a normal bureaucratic response when you have this social and economic crisis is unacceptable," Rep. Barney Frank, chairman of the House Financial Services Committee told the American Banker, a trade publication. "I cannot believe that this would wait."

HUD Secretary Steve Preston quickly reassured both Frank and Sen. Chris Dodd, chairman of the Senate banking committee, that his department would pull out all stops to have the FHA rules ready by October 1 -- breakneck speed by usual federal rule-making standards. Senator Dodd met with Preston and later said that HUD staffers "are all very confident" that they'll be able to meet the deadline.

Meanwhile, major mortgage lenders are complaining that the final housing legislation is forcing them to retool their computer system for the second time within a short time -- at great expense -- in order to participate with FHA refinancing or new home purchase programs.

That's because Congress clamped a one year moratorium on the use of "risk based pricing" underwriting for all FHA loans, barely weeks after FHA itself required lenders to switch their systems to a risk-based program using credit scores and varying downpayment amounts.

Anne Canfield, executive director of the Consumer Mortgage Coalition, which represents the biggest players in the FHA arena such as Bank of America, Wells Fargo and Citigroup, said that having to retool vast electronic systems within such a compressed time period could temporarily put some lenders out of the FHA business after October 1, thereby defeating Congress's objective of rapidly shifting more borrowers out of suprime and into more affordable home loans.

Saving AmeriDream

To: REAL ESTATE EDITORS

Contact: Henry Fawell of AmeriDream, +1-410-545-5830

GAITHERSBURG, Md., Aug. 1 /PRNewswire-USNewswire/ -- AmeriDream, Inc., today applauds the introduction of bipartisan legislation to reauthorize and reform charitable downpayment assistance. The bill, H.R. 6694 sponsored by U.S. Rep. Al Green (TX-09), would remedy a harmful provision in the new housing law which limits homeownership opportunities for low and middle-income Americans. The legislation is co-sponsored by U.S. Representatives Gary Miller (CA-42), Maxine Waters (CA-35), and Christopher Shays (CT-4) and reauthorizes and reforms charitable downpayment assistance funded in part by sellers, which has helped over one million families and individuals become homeowners since 1999. The program was eliminated by legislation signed by President Bush on July 30, 2008.

The Green-Miller-Waters-Shays plan would make non-profit downpayment assistance an allowable gift source for FHA borrowers. The bill further seeks to ensure that providers of the downpayment assistance operate in a transparent manner to guard against conflicts of interest. It also includes language to ensure that the Federal Housing Administration maintains its financial stability by permanently authorizing the Secretary of the Department of Housing & Urban Development to assess higher premiums to higher risk borrowers.

To view the entire legislation and learn how you can support it, visit http://www.ameridream.org/documents/congress/hr6694.pdf .

"Congress has the power to mend - not end - downpayment assistance funded in part by sellers," said U.S. Rep. Al Green. "More than 100,000 hard-working families and individuals, many of them women and minorities, depend on these programs annually to become homeowners. I introduced this bipartisan legislation to preserve access to homeownership while protecting the FHA's solvency. I thank my colleagues, Financial Services Chairman Barney Frank, Housing Subcommittee Chairwoman Maxine Waters, and Reps. Gary Miller and Christopher Shays, for their support of this important legislation and for recognizing that the next generation of homeowners is counting on this program."

More than 32,000 Americans have called on Congress and the Bush Administration to preserve charitable downpayment assistance over the past year through phone calls, letters, and emails. They join a broad coalition of supporters, including the National Association of Homebuilders, the Labor Council for Latin American Advancement, and the U.S. Conference of Mayors, the Congressional Black Caucus, and the Congressional Hispanic Caucus.

The recent housing bill may have slammed the door on working families, but we are heartened that Congress has begun to take steps to re-open it. U.S. Representatives Al Green, Gary Miller, Maxine Waters, and Christopher Shays understand what is at stake for working families and have proposed common-sense, constructive reforms to put them back on the path to homeownership. We strongly support their efforts to re-authorize and reform charitable downpayment assistance, said Ann Ashburn, President of AmeriDream.

BACKGROUND: Charitable downpayment assistance funded in part with seller participation has allowed homeownership to grow without using taxpayer dollars. To date, more than one million families and individuals have utilized this downpayment assistance, generating nearly $10 billion in home equity for those families. These working families qualify for FHA insured loans in every respect, but are unable to save the needed downpayment. AmeriDream has provided more than 250,000 gifts to aspiring homeowners, approximately 80% of whom were first-time homebuyers. AmeriDream also has helped educate 60,000 homebuyers through homebuyer education courses, helped 1,200 homeowners retain their homes when confronted with mortgage difficulties, and committed over $30 million to affordable housing development in local communities.

SOURCE AmeriDream

What Are REO Properties?

When a property is sold through a foreclosure auction, its owner usually owes more to the lender than the market value of the property itself. This is often a barrier to selling the property, and sometimes such foreclosure auctions do not draw any bidders. As a result, not many foreclosure auctions end with the sale of the property, rather the title reverts back to the financial institution holding the lien. Properties in this category are referred to as REO (Real Estate Owned) properties.

After the bank takes possession of the property, the mortgage loan disappears and the financial institution deals with any items owed by the prior borrower, such as homeowner association fees. The financial institution also tries to get the IRS to remove any tax liens against the property. The current owners are usually evicted and often repairs are made to damage on the property in order to make it more attractive to potential buyers.

The best parts of buying a REO property are that buyers have significant leverage and may be able to turn the property around quickly, making money by speculating on above average returns. Banks are trying to get the maximum return when they sell an REO property directly. They want to sell them quickly for two main reasons: first, they don't want to tie up their money in capital reserves they are required to set aside for a foreclosed property, and second, the management of such properties is a headache they would rather not have.

However, banks are very sophisticated when it comes to managing REOs and foreclosures, often having a department dedicated to them. The selling process starts when a potential buyer makes an offer to the financial institution, which is gone over by its management. Often, the institution will make a counteroffer, and the buyer may respond with another offer. After they have agreed on the price, terms, and conditions, a contract for the sale can be made.

When preparing to make an offer, a potential buyer needs to look at what comparable properties in the area are worth, along with the cost of any needed repairs. Financial institutions usually sell such properties as-is, which makes the buyer's inspection even more important. If they discover damage that they did not anticipate, which the institution will not repair, they can then cancel the transaction.

Investors dedicate much to buying REO properties in terms of funds (often cash), work, time, and effort, thus the price needs to be far enough below market value to justify the risk. Foreclosures are properties that already have had problems that often include tax issues, a lack of maintenance, substantial repairs, and often needed improvements that cost a significant amount of money, and any investor looking to buy such a property needs to keep this in mind at all times.

Investing in foreclosures and distressed properties is only as successful as the information you have available to you. Contact me or visit my Phoenix Bank Owned Properties web page

Dynamic Phoenix Property Search Tool

You've got to check out our new Phoenix Property Search solution! This new website feature makes an interactive map onto which properties are plotted as the central focus point. This Phoenix MLS search tool is blazingly fast, incredibly flexible, extremely simple to use, and is even powerful enough that many agents have said that they use my solution instead of their MLS's own search capabilities.

Our forward facing search for buyers (and even agents) leaves nothing to be desired. Visitors can search for properties by just dragging and dropping different elements on the web page and by interacting with the map. Every search that a visitor makes is returned instantly, and the matching results are displayed on that same page without reloading; essentially, there's just no need to wait. Each individual property, whether on the map or listed in the search results section, can be clicked on to instantly switch the program from the map tab to a full-featured property details tab. On it, the visitor will find all of the information about that property as well as a contact form, a mortgage calculator, a Zillow Zestimate (when desired by the agent or broker), a Google Street View of the property, a mini-map, school and community information, and so much more.

Short Sales 101

Why Would a Lender Do a Short Sale?

There are many ways to lose a home but signing away ownership in a manner that destroys credit, embarrasses the family and strips an owner of dignity is one of the hardest. For owners who can no longer afford to keep mortgage payments current, there are alternatives to bankruptcy or foreclosure proceedings. One of those options is called a "short sale."

When lenders agree to do a short sale in real estate, it means the lender is accepting less than the total amount due. Not all lenders will accept short sales or discounted payoffs, especially if it would make more financial sense to foreclose; moreover, not all sellers nor all properties qualify for short sales.

If you are considering buying a short sale, there could be drawbacks.

For your protection, I suggest that all borrowers:

• Obtain legal advice from a competent real estate lawyer
  
• Call an accountant to discuss short sale tax ramifications

As a real estate agent, I am not licensed as a lawyer nor a CPA and cannot advise on those consequences. Except for certain conditions pursuant to the Mortgage Forgiveness Debt Relief Act of 2007, be aware the I.R.S. could consider debt forgiveness as income, and there is no guarantee that a lender who accepts a short sale will not legally pursue a borrower for the difference between the amount owed and the amount paid. In some states, this amount is known as a deficiency. A lawyer can determine whether your loan qualifies for a deficiency judgment or claim.

Although all lenders have varying requirements and may demand that a borrower submit a wide array of documentation, the following steps will give you a pretty good idea of what to expect.

• Call the Lender
  You may need to make a half dozen phone calls before you find the person responsible for handling short sales. You do not want to talk to the "real estate short sale" or "work out" department, you want the supervisor's name, the name of the individual capable of making a decision.

• Submit Letter of Authorization
  Lenders typically do not want to disclose any of your personal information without written authorization to do so. If you are working with a real estate agent, closing agent, title company or lawyer, you will receive better cooperation if you write a letter to the lender giving the lender permission to talk with those specific interested parties about your loan. The letter should include the following:
  
  
  • Property Address
  • Loan Reference Number
  • Your Name
  • The Date
  • Your Agent's Name & Contact Information

• Preliminary Net Sheet
  This is an estimated closing statement that shows the sales price you expect to receive and all the costs of sale, unpaid loan balances, outstanding payments due and late fees, including real estate commissions, if any. Your closing agent or lawyer should be able to prepare this for you, if you do not know how to calculate any of these fees. If the bottom line shows cash to the seller, you will probably not need a short sale.

• Hardship Letter
  The sadder, the better. This statement of facts describes how you got into this financial bind and makes a plea to the lender to accept less than full payment. Lenders are not inhumane and can understand if you lost your job, were hospitalized or a truck ran over your entire family, but lenders are not particularly empathetic to situations involving dishonesty or criminal behavior.

• Proof of Income and Assets
  It is best to be truthful and honest about your financial situation and disclose assets. Lenders will want to know if you have savings accounts, money market accounts, stocks or bonds, negotiable instruments, cash or other real estate or anything of tangible value. Lenders are not in the charity business and often require assurance that the debtor cannot pay back any of the debt that it is forgiving.

• Copies of Bank Statements
  If your bank statements reflect unaccountable deposits, large cash withdrawals or an unusual number of checks, it's probably a good idea to explain each of those line items to the lender. In addition, the lender might want you to account for each and every deposit so it can determine whether deposits will continue.

• Comparative Market Analysis
  Sometimes markets decline and property values fall. If this is part of the reason that you cannot sell your home for enough to pay off the lender, this fact should be substantiated for the lender through a comparative market analysis (CMA). Your real estate agent can prepare a CMA for you, which will show prices of similar homes:
  
  
  • Active on the market
  • Pending sales
    
  • Solds from the past six months.

• Purchase Agreement & Listing Agreement
  When you reach an agreement to sell with a prospective purchaser, the lender will want a copy of the offer, along with a copy of your listing agreement. Be prepared for the lender to renegotiate commissions and to refuse to pay for certain items such as home protection plans or termite inspections.

Now, if everything goes well, the lender will approve your short sale. As part of the negotiation, you might ask that the lender not report adverse credit to the credit reporting agencies, but realize that the lender is under no obligation to accommodate this request.

If you have questions regarding the short-sale of your property, please contact me ASAP, 480-283-3533, or email me heidimccarthy@kw.com I'd be happy to review the process with you. DO NOT procrastinate and wait for the foreclosure process to begin, You MUST move quickly.

Read more about Before you Buy a Short Sale.

Short Sales Page 2

Buyers pursue short sales to get a good deal. So when you see a price listed for a home that you think is too low for the neighborhood, before you jump on that price like hot fudge on a sundae, ask your agent to call the listing agent to find out if the home is a short sale.

Because you might want to think twice about making an offer on a pre-foreclosure, short sale home. It's not as simple as you may believe, and very few can close in 30 days or less.

What is a Short Sale?

A short sale means the seller's lender is accepting a discounted payoff to release an existing mortgage. Just because a property is listed with short sale terms does not mean the lender will accept your offer, even if the seller accepts it.

Be aware that the seller need not be in default -- to have stopped making mortgage payments -- before a lender will consider a short sale. A lender may consider a short sale if the seller is current but the value has fallen. The seller may have over-encumbered, owe more than the home is worth, so a discounted price might bring the price in line with market value, not below it.

• Basics of Short Sales
• What is a Foreclosure?
• 11 Reasons NOT to Buy a Short Sale

Check the Public Records

Do your research before making an offer to purchase. Your agent can find out who is in title, whether a foreclosure notice has been filed and how much is owed to the lender(s). This is important because it will help you to determine how much to offer.

If there are two loans, you could have a problem. The first mortgage lender's position is protected by the second lender, unless the second lender does not want to foreclose. If a seller owes $160,000 on the first and $40,000 on the second, offering $160,000 leaves nothing for the second. The first will need to give something to the second to gain its cooperation.

• Determine Your Type of Marketplace
• What is a Title Policy?
• Chain-of-Title Definition

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Hire an Agent with Short Sale Experience

It's one strike against you if the listing agent has never handled a short sale, but it's even worse if your own agent has no experience in that arena. You need an experienced short sale agent.

An agent with experience in short sales will help to expedite your transaction and protect your interests. You don't want to miss any important detail due to inexperience or find out your transaction is not going to close on time because no one has followed up in a timely manner.

• Finding Real Estate Agents
• Rules for Working With Agents
• Fiduciary Agent Relationships

Prepare the Seller for Lender Demands

A lender is not going to agree to a short sale unless the seller has no equity and is unable to repay the difference between your sales price and the existing loans. Sellers need to provide a hardship letter to the lender. Sellers may also owe taxes on the amount of debt that is forgiven.

A seller I know once demanded that the buyer slip the seller $1,000 to be given the right to purchase the seller's property. We said no. This is fraud. The lender legally pursued that seller. Do not be lured by sellers who suggest this practice. In a short sale, the seller receives no money because the lender is losing money.

• Tax Consequences for Home Offices
• Handling Mortgage Loan Adjustments
• How Sellers Can get Free Credit Report

Submit Documentation & Purchase Offer to Lender

Once the seller has accepted your offer, send it to the lender for approval. You do not have a deal until the lender accepts. Also, send the lender a copy of your earnest money deposit. Do not be astonished if the lender asks you to increase it.

In addition, the lender will want to see that you have your own loan available and you are preapproved. Send a preapproval letter to the lender. It will help if your agent sends a list of comparable sales that support the price you are offering to pay for the home.

• Computing Mortgage Interest
• Understanding Option ARM Loans
• Definition of Negative Amortization

Give the Lender a Deadline

Make your offer contingent upon the lender's acceptance. Give the lender a time frame in which to respond, after which, you will be free to cancel. If the lender is under no pressure to make a decision, the paperwork will sit on an underling's desk.

Some lenders submit short sales to committee, but most can make a decision within two to three weeks, providing you have submitted the offer to the individual in decision-making capacity. Get a name and phone number for the appropriate contact at the lender. Don't send an offer blindly to a department.

• Protecting Your Good Faith Deposit
• Purchase Offer Negotiation Tips
• Writing Buyer's Market Offers

Expect Commission Negotiations

Regardless of the commission the seller has agreed to pay, the lender is actually the entity paying the commission. The reason is the seller is not receiving any money with which to pay a commission. Since the lender is losing money, the lender will likely negotiate the commission directly with the listing broker, who will then share the commission with your agent.

If you have signed a buyer's broker agreement with your agent, ask if the agent will waive the difference due or you might have to pay it out of your pocket. Some brokers feel it is unfair to penalize the agent, but the lender is calling the shots.

• Who Pays the Real Estate Commission?
• How to Negotiate Real Estate Commissions
• Buyer's Broker Agreements

Reserve the Right to Conduct Inspections

Generally, the lender will not pay for customary items that a seller would pay. These include home protection plans for the buyer, buyer credits of any kind and pest / termite inspections. A buyer will be asked to purchase the property "as is," which means no repairs.

It is extremely important that a buyer obtain a home inspection and pay for other types of inspections such as pest, roof, sewers, septic tanks, chimney or fireplace inspections. Do not waive your right to obtain these inspections and make your offer contingent on approving them.

Back to How to Handle Short Sales

• Basics About a Home Warranty
• How to Spot a Wet Basement
• The Final Home Inspection Walk-Through