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If you are thinking of buying a home using conventional financing, then now may be the time to act. Fixed-rate mortgages reached new lows for 2011 on Friday, with 30-year fixed loans averaging 4.60 percent and 15-year fixed loans averaging 3.78 percent. This is 0.24 percent and 0.43 percent less, respectively, than the same loans at this time last year, leading the National Association of Home Builders to report that home affordability has now reached its highest level in 20 years [1].

Over the past few months, nearly all experts have agreed that mortgage rates are highly likely to rise in June of this year. And in other parts of the world like Australia and Germany, lenders are hiking rates to combat inflation [2]. However, in the United States rates have remained surprisingly low long past when analysts predicted they would rise. It remains to be seen if this June brings higher rates or whether the government will continue to fight to keep interest rates as low as possible.

Do you think that the time has come to raise the rates, or should they remain low?

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Let us know what you think about interest rates in the U.S. and around the world in the space below.

In 2012, nearly 10,000 people in the United States will be turning 65 – the standard retirement age in the United States – every day. By 2030, estimates the Alliance for Aging Research, the last wave of baby boomers will have reached retirement age and there will be around 70 million “older Americans” living in the United States[1]. And the homes that they lived in for the majority of their adult lives will no longer be practical as the boomers age and need more assistance with daily needs.

Enter the senior housing boom and a serious shortage in specialized, senior housing that could create a strain on housing markets that many believe cannot support new construction at this point in time. For example, in Green Bay, Wisconsin, analysts fear that “in a couple of years, we might have a shortage [of senior living options]” as the current population ages. Individuals are remaining longer in their current homes thanks largely to the state of the housing market, but when the move can no longer be delayed, boomers are likely to need to move directly from their former homes to assisted living – without stopping at “independent living” (where residents live basically on their own, but may have access to amenities or services like housecleaning) along the way[2]. Particularly in demand, says Christel Giesen, a team leader at Green Bay’s Aging and Disability Resource Center, will be government-subsidized assisted living. Should the economy remain unstable, a large portion of today’s baby boomers will likely be looking for affordable senior housing when they do decide to make the move to some sort of assisted living.

This pending need looks like a good window of opportunity for developers, but the heavy emphasis on government-subsidized housing could create a problem for would-be builders and investors. Do you think that the senior housing issue will help or hurt the housing market in the long run?

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Let us know where you think the best investments in real estate should be made in the space below.

[1]http://www.rgj.com/article/20070617/NEWS/706150508/Is-Nevada-ready-aging-boom-s-coming-quickly?odyssey=nav|head
[2]http://www.greenbaypressgazette.com/article/20110527/GPG0101/105270606/Green-Bay-s-boomers-may-fuel-senior-housing-bust

In order for loan servicers to modify a Fannie Mae mortgage, they have to verify that the borrower is, in fact, in “imminent default,” meaning that if something does not change, they will default on their mortgage and the property will go into foreclosure. Fannie Mae released new guidelines yesterday in an effort to make the process of obtaining such a loan modification easier and more reliable while still excluding strategic defaulters from the process[1].

When a borrower applies for a loan modification, now the mortgage servicers can use Freddie Mac’s Imminent Default Indicator (IDI) to evaluate the gravity of the situation. They borrower must have no more than $25,000 in cash reserves and show “acceptable hardship” that is preventing them from paying their loan. For example, a co-borrower might have died; a long-term illness or disability come onto the scene or a divorce may have occurred. Once the IDI has cleared, then servicers must use a GSE-approved broker or appraiser to get a broker price opinion (BPO) or an appraisal. No servicer can use one provider for more than three-quarters of all their BPOs and appraisals. Overall, the new regulations make the process less stringent, and allow borrowers who do not qualify for HAMP either because they are not delinquent enough or because they do not fit other qualifications to still be evaluated following the standard imminent default evaluation for HAMP.

These changes come on the heels of a request by Fannie Mae for an additional $8.5 billion from taxpayers to help deal with losses on loans made prior to 2009[2]. Critics allege that Fannie Mae does not deserve the money, as it is not providing adequate aid to the taxpayers that are funding it. Do you think that the GSE is handling loan modifications appropriately? Have you heard any success stories?

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Let us know what you think about Fannie Mae (and Freddie Mac for that matter) in the space below.

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[1] http://www.dsnews.com/articles/fannie-mae-expands-imminent-default-test-issues-short-sale-value-rules-2011-05-26

[2] http://www.reuters.com/article/2011/05/06/us-usa-treasury-fannie-mae-idUSTRE7456IJ20110506

Imagine this: you are getting ready to buy a new home, and you’ve reached an agreement with the seller. You are both eager to get the deal done. Then, when you reach the closing table, you find out that you need several hundred – or even several thousand – dollars more than purchase price and closing costs you were expecting. You walk away, disappointed, and the homeowner continues to struggle to sell their house.

The situation described above can happen if a neighborhood has private transfer fees written into its deed restrictions, but no more in Texas, making the state the 33^rd to ban these transfer fees[1]. Private transfer fees are a technique that developers often use to create an income stream outside of building and construction, and they are in use throughout the country. Many homeowners’ associations also implement these types of fees in order to fund community improvements and help track property transfers. While they have only fairly recently become the subject of wide scrutiny, critics argue that they hurt homeowners’ ability to sell their homes and compete in a down market. The Texas legislature agrees, and has banned new transfer fees and will require developers receiving transfer fees presently to update a notice in county property records every three years or the transfer fee will become void.

Some states have done away with transfer fees all together, but Texas opted to continue to allow HOAs to continue to collect these fees. And although the FHA had considered globally ceasing to make loans on properties where these fees were in effect, currently FHA lending regulations only exclude developer transfer fees, which may be why Texas opted to leave HOA fees alone[2].

Many homeowner advocate groups have urged the remaining 17 state legislatures to also eliminate developer transfer fees, and they also complain that “grandfathering” legislation like that in Texas is simply not enough to deal with the problem. Do you think that the Texas law is a good one, or do they need to do more (or less)?

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Let us know what you think about transfer fees from developers or from HOAs in the space below.

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[1] http://www.chron.com/disp/story.mpl/business/7581758.html

[2] http://www.ourbroker.com/closing/whats-a-private-transfer-fee-in-real-estate/#axzz1NYQ6dNbf

Settling up with the Office of the Comptroller of Currency for its part in last fall’s robo-signer debacle did not help Bank of America much when it comes to its mortgage-servicing and foreclosure practices. The lender is still facing close scrutiny and increased pressure from Utah and Connecticut attorney generals who are accusing the bank of failing to fix “well-documented” problems in its mortgage-servicing business[1]. BofA and four other major lenders (JPMorgan Chase, Citigroup, Wells Fargo and Ally Financial) could face as much as $17 billion in claims if they cannot reach a settlement with the 50 AGs currently conducting the probe into mortgage practices and foreclosure processes nationwide. In fact, Utah AG Mark Shurtleff recently sent an open letter to BofA CEO Brian Moynihan declaring that “all real estate foreclosures conducted by ReconTrust [a wholly owned subsidiary of BofA that conducts foreclosures and other debt collections for the lender] are not in compliance with Utah’s status, and are hence illegal.”

The AG added that BofA must respond within 30 days notifying him how the lender intends to proceed in terms of rectifying the issue, since Shurtleff “intends to enforce Utah’s status,” indicating that there will likely be lawsuits against the lender if the issue is not resolved[2]. AGs across the country have continued to target BofA as well. George Jespen, Connecticut’s AG, sent his own open letter last week to Moynihan stating that “Bank of America can and should do much more.”

These letters come in the wake of a more general threat on the part of the national AG probe into lending practices indicating that if lenders fail to settle with AGs, they could face billions in lawsuits and other fines[3]. However, thus far no AG or group of AGs has commented on those reports, including Tom Miller, Iowa AG, who heads the investigation.

Do you think that the AG probe is still effective, or does Mark Shurtleff have the right idea when he declares that all BofA foreclosures are basically illegal in his state?

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Let us know your story in the space below. We are still looking for experts and readers with real stories about their experiences to interview for an upcoming series, so please leave your email address if you would like to be contacted.

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[1] http://www.bloomberg.com/news/2011-05-26/bofa-targeted-as-states-step-up-pressure-in-foreclosure-probe.html

[2] http://online.wsj.com/article/SB10001424052702304066504576345301199902240.html

[3] http://www.dsnews.com/articles/states-threaten-high-dollar-lawsuits-in-settlement-power-play-2011-05-25

Although short sales are a great way for homeowners to avoid foreclosure and lenders avoid having to write off an entire loan if they cannot move the property in question in a timely fashion, they are costing banks more and more money each year, estimates data firm CoreLogic[1]. Last year, lenders, servicers and investors lost an estimated $310 million due to “suspicious” short sales; this year, the number is predicted to log in around $375 million. A “suspicious” short sale is one in which the lender accepts less than they arguably should have on a property. Generally, data firms identify “suspicious” short sales by looking for properties that undergo multiple closings – one with the bank and one with another party – within short periods of time. This is based on the belief that if the person making the short sale offer had been working in good faith, they would not have been able to sell the house for a higher amount so quickly. CoreLogic estimates that same-day resales tend to average $50,000 more than the short sale price.

Now, as a real estate investor, you may be thinking that this just sounds like the classic “buy low and sell high” axiom that has been crucial to any type of investing for years. However, using this strategy in short sales can put a target on your back as far as short sale “fraud” investigators are concerned. Another red flag? LLC (limited liability company) buyers. “While [LLCs] comprise only two percent of all buyers, they comprise more than 25 percent of buyers in suspicious short sale transactions,” reports CoreLogic senior vice president of product management and analytics Tim Grace, adding that this validates already-existing industry perceptions about LLCs.

Although CoreLogic calls lender “losses” from short sales “unnecessary,” is it really fair to say that investors and other individuals who can negotiate a better price than the banks are fraudsters? Of course, you should not doctor appraisals or lie in order to get a cheaper short sale, but if the property is not going to sell without your participation in the deal, then is it really fair to say you are creating a loss for the bank?

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Tell us about your experience with short sales and whether you feel that this perception that selling a short sale for more than you paid for it is really fair to real estate investors.

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[1] http://www.dsnews.com/articles/suspect-short-sales-could-cost-lenders-375m-this-year-report-2011-05-25

Bad enough to face short sales and foreclosure because of a move that you have no choice about making. Even worse to then face losing the job that necessitated the move because your damaged credit killed your security clearance. When military members are compelled to change their residence for the sake of their jobs, they often leave homes behind them that they simply cannot sell. And when that situation hits a breaking point and necessitates a short sale or foreclosure, these same military members risk the loss of vital security clearance – partially dependent on credit history in many cases – that is critical to their ability to effectively do their jobs[1].

Although there are aid programs for exactly this type of issue, not all service members qualify. 740 airmen at Nevada’s Nellis Air Force Base, for example, are upside down on their current mortgages but do not qualify for aid. They cannot sell their homes and face loss of security clearance if or when they ultimately move for their work or are forced to short sell their homes or turn in their keys to their lenders. At locations like Nellis, servicemen and women have to rent or buy because there is limited or no on-base housing.

To make matters worse, some real estate professionals believe that even lenders who are allegedly “service member friendly” sometimes interfere with contracts to sell property if they fear that the sale will result in a loss. These professionals also allege that lenders are not doing enough to help resolve situations involving mandatory moves and relocations.

How do you think that this situation should be handled? Should the security clearance process be reevaluated? Should lenders be compelled to change the way that they deal with service members in the armed forces?

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Let us know what you think should be done in the space below.

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[1] http://www.lvrj.com/news/when-troops-get-orders-to-move-some-risk-losing-houses-122412193.html

American Home Mortgage Servicing would make cuts to mortgage principals – if the U.S. Treasury would just let the company do so. The company, which is one of the largest subprime mortgage servicers in the industry, is asking the U.S. Treasury to unblock loans from securities in order to free up potential principal reductions for as many as 1 million homeowners[1]. Currently, loans tied up in securities contracts cannot be sold prior to foreclosure, nor can the principal be adjusted during a loan modification. American Home Mortgage hopes that the ability to modify principal will enable it to make lasting, effective loan modifications with monthly payments that homeowners will be able to afford in the long term. Currently, if a loan is “tied up in a bond,” principal reductions are out of the question, explained American Home Mortgage’s chief legal officer Jordan Dorchuck as he made the case to the Treasury that the new plan “should provide a material benefit to borrowers.” The company hopes that the Treasury will be amenable to the proposal because it gives borrowers the “one last clear chance that HAMP was intended to provide, but appears unable to deliver.”

According to the proposal, investors in these securities will actually benefit from the unwinding because they will be less likely to lose money due to foreclosure delays and “hasty modifications.” Do you think that this is a good move, or ultimately is this just one more way for lenders to “game” the system and the investors involved in good faith in the mortgage securities business?

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Let us know what you think of this tack on principal reduction in the space below.

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[1] http://www.reuters.com/article/2011/05/20/mortgages-default-proposal-idUSN2020061920110520

Although the housing market is showing “moderate signs of improvement” according to the latest National Housing Survey from government-controlled GSE Fannie Mae, Americans still lack confidence in the overall economy and, as a result, are feeling less financially secure, leading to weak mortgage demand and only a marginal improvement in consumer attitudes[1]. The report indicates that consumers are feeling better than they did in 2010 about the economy and the housing market, but not enough better to do much about it. However, there is a silver lining for some real estate investors at least: 43 percent of respondents to the survey expect rents to increase in the coming year and many are planning to pay rather than risk taking out a mortgage on a new home. In addition, more real estate investors are purchasing multiple residential properties to accommodate new rental demands, and some analysts predict that there will be 125,000 to 200,000 additional residential rental units by the end of this year thanks, in large part, to investors paying cash[2]. This is good news for the real estate market at large as well as would-be renters who want to live in a real home rather than a multifamily unit.

Reports from sources like Moody’s and S&P indicate that multifamily rental units are also being snapped up in record volumes across the country. In fact, last week a Las Vegas auction netted $1 billion in multifamily unit transactions[3].

Are you getting involved in the rental real estate business? Do you think multifamily units or residential properties are the better alternative?

Thank you for reading REJournalOnline!

Let us know what area of the real estate market you think is primed for investors right now in the space below.

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[1] http://www.mortgagenewsdaily.com/05122011_fannie_mae_housing_survey.asp

[2] http://www.housingpredictor.com/2011/home-sales.html

[3] http://www.lvrj.com/business/multifamily-housing-lures-buyers-122295649.html?ref=649

After state lawmakers opted not to renew a $6 million stipend intended to pay for the man(judge)power to reduce the state’s foreclosure backlog, Florida is once more facing a serious swamp when it comes to resolving its foreclosure issues. In fact, after the first of July, judges will be unavailable to preside over foreclosure hearings, Judge John Hoy, a Palm Beach County Circuit judge, announced last week[1]. Palm Beach received $640,000 of last year’s stipend to add senior judges, case managers and assistants to work on the massive foreclosure case load, which enabled the county to process nearly 17,000 foreclosure cases. However, that left the backlog in Palm Beach alone at more than 29,000 and the statewide backlog is still 139,615.

Some analysts and homeowner advocates believe that more time is exactly what is needed to resolve the backlog, arguing that loan modifications, short sales and “just going mortgage-free” will help homeowners deal with their delinquency issues. However, others fear that there will be a “situation where there will be a further deterioration of values of the properties so the challenge of rebuilding will be stalled and compounded,” as Fort Lauderdale attorney Gary Poliakoff explains. He compared the situation in Florida to a broken record in that the situation cannot resolve until the foreclosures are settled in court. Because Florida is a judicial foreclosure state, lenders cannot foreclosure on the property by publicizing the foreclosure and then carrying out an eviction, which would eliminate court hearings in many cases, such as abandoned properties.

Should Florida shell out an additional stipend? At the current rate and assuming no new foreclosures, it will take another two years and at least $12 million to eliminate the backlog.

Thank you for reading REJournalOnline!

Let us know what you think should be done about the foreclosure backlogs in Florida and elsewhere in the space below.

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[1] http://www.palmbeachpost.com/money/foreclosures/fewer-judges-will-be-hearing-florida-foreclosures-as-1486058.html