Category Archives: Real Estate Information

Why It’s Finally Easier to Get a New Mortgage

By: Ian Salisbury @iansalisbury

Courtesy of Money Magazine

April 19, 2016

Rates are again low and banks are loosening up, but sterling credit still pays.

After the housing crisis, mortgage lending standards became unreasonably tight for many. In 2014, only 51% of refi applications went through, according to mortgage-software company Ellie Mae, and one that didn’t gained notoriety: That year Ben Bernanke said he was turned down when he tried to refinance the mortgage on his Washington, D.C., home shortly after stepping down as chairman of the Federal Reserve. While he didn’t say why, one theory was that his post-Fed income as a consultant was irregular.

Today, 66% of refis are approved, and that’s not the only good sign for borrowers in search of a plain-vanilla mortgage—that is, a 20% down fixed- or adjustable-rate loan guaranteed by the government-sponsored agencies Fannie Mae or Freddie Mac. As the graphic below shows, the average FICO credit score on a 30-year loan to buy a home has dropped from a high of 765 in 2010 to a recent 755, the real estate data firm CoreLogic reports. Borrowers with the average score of 695 might be able to get a conforming mortgage (loans for less than $417,000 in most of the country) for the first time in years, says Trulia chief economist Ralph McLaughlin.

Get off the bubble

The very best rates are still reserved for borrowers with top scores of 800-plus. The good news is that the difference between the rate you’ll get with an excellent score of 800 and what you’ll get with a very good score between 750 and 800 has narrowed to almost zero, says McLaughlin. “The big gap is between people in the 750 range and those in the low 700s and high 600s,” he says. With weaker credit, you could pay nearly a quarter of a point more. On a $200,000 mortgage, that’s $10,000 more over the 30-year life of the loan.

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While you should be able to get a top rate with a 740 credit score, lenders don’t follow uniform cutoffs. That score might get you lumped in with borrowers in the 700 to 750 range at one bank but the 740 to 800 range at another. The more quotes you get, the more likely you are to land the best rate you can.

Revisit your refi

Banks have gotten even more relaxed about refinancing. Once you have a record of paying your mortgage, banks typically assume you’ll pay it in the future.

Even if you already hit the refi table—say when rates fell well below 5% in 2010—check back. The Federal Reserve raised short-term interest rates in December, raising worries of higher consumer loan rates, and it may do so again in June. But mortgages typically track 10-year Treasury bond rates. Investors, uneasy about the economy’s long-term prospects, have been snapping up these bonds, pushing prices up and rates down. The upshot: The average rate on a 30-year mortgage is 3.9%, lower than at almost any time since early 2013. But with the Fed still committed to raising rates in 2016, that low rate will eventually rise. Don’t dally.

Calculator: Should I refinance my mortgage?

One way to profit now: Switch from a 30-year to a 15-year loan. If you last refinanced in 2010, your rate is probably around 4.7%, the average that year. On a $200,000 mortgage, that monthly bill is $1,036. By swapping your mortgage for a 15-year loan, you should be able to lock in 3.1%. That will bump your payment to $1,229 but let you retire the loan nearly a decade sooner and save $77,000 in interest.

Let yourself go big

In some high-cost areas, home prices have surged: Median home prices in San Jose have doubled off their housing-crisis lows. Prices are up 60% in Seattle and 45% in Washington, D.C. That can be a problem. Loans for more than $625,500 in high-cost areas and $417,000 in the rest of the country don’t qualify for guarantees from Fannie or Freddie, making them harder to get.

While overall caps haven’t changed in more than a decade, limits in 39 counties across the country, including areas near Boston and Seattle, were raised last year. If your home failed to qualify for a Fannie- and Freddie-eligible loan before, check again. (For limits by county, go to the data section of fhfa.gov.)

What’s more, banks are starting to warm to customers who need these bigger loans, known as jumbos, though they are still skittish when it comes to credit. The average FICO score on a jumbo loan is 770 for purchases and only slightly lower for refinancings. But if you can meet that criteria, you’ll pay a rate of just 3.8%.

Read Next: How to Master Shopping for a Mortgage Online

Finally, there’s one jumbo option to be leery of. You may be offered an interest-only loan, which is initially more affordable because you don’t pay principal until years later. Stay away: “These are one of the products that led to the downturn,” says HSH‘s Tim Manni. “Now we are starting to see them surface. It’s risky business.”

L.A. County’s hottest ZIP Codes . . . . including Manhattan Beach, Hermosa Beach, and Playa del Rey!

LAtimes_Business

By Andrew Khouri

Courtesy of the Los Angeles Times, January 16, 2016

If you were a seller, the Southern California housing market was a good one last year.

The economy improved. Sales jumped after a lethargic 2014. And prices climbed even higher, making an already expensive region even more so. By the end of November, the median home price for the six-county market was $438,000, up 6.8% from the same month a year earlier, according to the data from CoreLogic.

Still, the real estate frenzy cooled through late summer and fall. To what extent the slowdown could be blamed on the typical seasonality of home sales or to the price hikes that have made housing increasingly unaffordable is unclear. A better picture of the market’s health should emerge during the busy spring buying season.

Economists generally expect further improvement in the market, though they predict that the price increases will slow as fewer families are able to buy into it — a trend that started in 2013.
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Fannie Mae, Freddie Mac Ease Lending Standards

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Fannie Mae, Freddie Mac reach deal to ease mortgage lending

By E. Scott Reckard, Tim Logan , Los Angeles Times

Mortgage financing giants Fannie Mae and Freddie Mac, together with their federal regulator, have drawn up rules aimed at loosening constricted lending standards to make mortgages more affordable and easier to get for those with less than stellar credit.

The move comes in response to criticism that banks have clamped down too much on loan criteria to avoid legal liability for any mortgages they sell to Fannie or Freddie that may go bad in the future.

The two companies, seized by the government in 2008 as they teetered on financial collapse during the Great Recession, turned on lenders over mortgages that fell apart as the market melted down in 2007. Many loans were poorly underwritten, with some lenders accepting simply a borrower’s statement on income rather than verifying it.

Bankers have been forced to pay tens of billions of dollars in recent years to settle assertions that the bad loans violated representations and warranties made when the loans were sold and demanding that the banks repurchase them.

In reaction, lenders have drawn their purse strings tighter than Fannie and Freddie require when evaluating loan applications, saying the threat of repurchase demands makes the risks worth taking only for borrowers with excellent credit profiles.

The clearer guidelines are intended to convince lenders that they won’t regret lending to higher-risk but still worthy borrowers, according to people briefed on the matter, who spoke on condition of anonymity because the program won’t be announced formally until next week.

Under the new rules, the financing firms would delineate what constitutes cause for requiring banks to repurchase loans. They also would reduce the minimum down payment to 3% from 5% generally needed to qualify for selling the loans to Fannie and Freddie.

The changes resulted from discussions that trade group Mortgage Bankers Assn. arranged between lenders and Fannie, Freddie and their regulator, the Federal Housing Finance Agency.

Fannie and Freddie are the biggest pillars of support for U.S. housing, guaranteeing 59% of all mortgages being written. They are regulated by the Federal Housing Finance Agency, which has tried to address the lenders’ complaints previously with changes that produced little effect on tight standards.

An FHFA rule that took effect in January 2013 said loans on which the borrower paid as agreed for the first 36 months would not be candidates for repurchasing unless they were clearly fraudulent or seriously overstated the borrowers’ qualifications.

Earlier this year, the FHFA further loosened its rules so that loans would be deemed solid even if a borrower fell delinquent for 30 days on two separate occasions during the first 36 months.

Fannie and Freddie guidelines set a minimum credit score at 620, once widely regarded as the cutoff between prime and subprime borrowers. But this year the average loan guaranteed by Freddie has a 742 credit score, high in the “excellent” credit range and down only a little from 756 in 2012.

The reduction in the minimum down payment for most Fannie and Freddie loans to 3% brings the requirement in sync with the Federal Housing Administration, which insures loans made to first-time and lower-income borrowers.

A few Fannie and Freddie programs already offer a 3% down payment. The giant mortgage companies generally require borrowers with down payments of less than 20% to buy private mortgage insurance to offset the greater risk, and will do so under the new guidelines.

Fannie and Freddie buy mortgages and issue debt securities backed by payments on the loans. The companies guarantee to pay investors themselves if the borrowers go delinquent.

Tight lending standards have held back home purchases by average buyers in recent years, slowing the nation’s economic recovery.

The Urban Institute estimates that 1.2 million more home loans would have been made in 2012 had the lending standards common in 2001 — well before safeguards were tossed out the window during the housing bubble — been in place.

Investors paying all cash for foreclosed properties buoyed housing markets for several years, but a decline in distressed sales and rising home prices have reduced those once common transactions.

The California Assn. of Realtors last week projected that home sales in the state this year would fall nearly 65,000 short of their initial forecast, in part because of tighter mortgage lending.

At No. 1 mortgage lender Wells Fargo & Co., Chief Financial Officer John R. Shrewsberry said this week that the standoff over mortgage repurchases has created two mortgage markets, only one of which — for affluent borrowers with well-established credit — serves borrowers well.

The low- to middle-income and minority borrowers most often thwarted by the tougher lending standards are also the same people who were hit hardest in the mortgage crisis, said Paul Leonard, California director of the Center for Responsible Lending.

“Those folks took it on the chin the hardest and have been least able to get up off of the mat,” Leonard said. “That’s a serious challenge in terms of building wealth.”

“There’s a perception of a lot of risk in lending to these communities,” he said. “Understandably, after the crisis the pendulum of mortgage credit standards swung to a far extreme. It’s now working its way back to a more moderate position.”

David Stevens, president of the Mortgage Bankers Assn. and a former FHA commissioner in the Obama administration, said his group has been in talks with the White House about ways to devise clearer guidelines.

“You’ve got to give confidence to lending institutions that they’re not going to be held accountable for minor mistakes,” Stevens said. “All the incentives [for lenders] right now are not aligned around prudent judgments. They’re aligned around complete risk avoidance for fear of retribution.”

Article courtesy of the Los Angeles Times

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Home Sales Post Gains

LAtimes_Business
September Purchases in Southland rise 1.2% as property values grow at slower pace.

By Tim Logan October 14, 2014 Los Angeles Times Business Section

Southern California’s housing market is starting to pick up the pace.

Home sales in the six-county Southland grew for the first time in a year in September as prices moderated from last year’s torrid gains, according to figures out Monday.

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The data are the latest sign of a housing market that’s reaching equilibrium after years of big swings, economists say.

Higher prices have pushed many investors and cash buyers out of the market, while still-low interest rates and an improving economy are luring more so-called regular buyers. And while prices aren’t climbing at the 20%-plus pace of last year, they’re still rising enough to keep sellers interested in selling.

quote_1“It seems like we’re heading toward more of a balance,” said Mark Gonzales, an agent with Redfin in West Los Angeles. “As long as we can get pricing right in line with people’s expectations, we’re in balance.”

That balance helped drive the number of sales across the region up 1.2% compared with a year ago, according to San Diego-based CoreLogic DataQuick. It’s a modest bump, but the first growth of any kind since September 2013, and a big swing from the 18% slide CoreLogic recorded in August.

Sales growth was strongest in Los Angeles and Orange counties, instead of in less-expensive markets farther east. And prices actually fell a bit, with the region’s median slipping to $413,000 from its post-crash high of $420,000 in August. Compared with a year ago, the median price is up 8.1%, and September was the first month in two years that none of the six counties CoreLogic tracks notched a double-digit annual gain.

The market right now has something to offer both buyers and sellers, said CoreLogic analyst Andrew LePage.

“There are still upward forces on home prices: Jobs are being created and families started at a time when the supply of homes for sale … remains relatively low,” he said. “Today’s home shoppers are more likely to find a less-crowded market with fewer intense multiple-offer situations and more serious, realistic buyers.”

It’s unclear, though, how long this equilibrium will last.

The California Assn. of Realtors last week forecast that price gains will keep slowing in 2015, and that sales will increase — after falling in 2014 — as buyers have a better chance to catch up to the new higher price points. But in a market in which many buyers struggle to afford a house, the prospect of higher interest rates is a constant threat, said the trade group’s chief executive, Joel Singer.

“Any increase is going to have a substantial effect on the number of sales,” Singer told a roomful of agents last week at the association’s annual convention in Anaheim.

Right now, though, rates are as low as they’ve been all year. The job market is improving. Even gasoline prices are down, which is putting would-be buyers in a better mood, said Syd Leibovitch, president of Rodeo Realty. His firm, one of the largest brokerages in Southern California, is starting to see both prices and sales pick up again for deals that will close later this fall.

“It was really unexpected,” he said. “August was a slower month. It seemed like homes were starting to sit and we were going into a more normalized market. Somewhere around mid-September it picked back up again. We started getting more multiple-offer situations.”

Gonzales has been seeing things quicken too. Calls and visits to Redfin’s website by prospective buyers were up 50% in September, and those house hunters are now out shopping.
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“They were frustrated with the way the market was going. A lot of them took a break,” he said. “Now it’s a prime time to come back in.”

And as they do, the pace of home sales should pick up even more speed, analysts said.