Texas Realty Blog

Does The Housing Recovery Act Help Texas Home Buyers

President Bush signed into law this week The Housing and Economic Recovery Act. This is the most sweeping change to housing reform since the New Deal of 1934. It is designed to assist more Americans invest in home ownership and shore up the faltering housing and mortgage markets. Like any legislation, it comes with the good and the bad. I encourage you to write your Congressmen to see if we can get legislation to revoke some of the bad.  For example, effective October 1, 2008, FHA will increase the minimum required down payment from 3% to 3.5% for Texas home buyers. The legislation also calls for the elimination of seller down-payment assistance programs such as AmeriDream and Nehemiah by October 1, 2008.

As of July 14, 2008, upfront MIP premiums became risk-based on credit scores and the annual premium increased across the board. Instead of the original plan of making FHA loans more affordable for potential Texas home buyers; the new legislation is doing the exact opposite and makes it more expensive.

Details of the Housing and Economic Recovery Act:
Here are some key provisions of the Housing and Economic Recovery Act:

• GSE Reform – including a strong independent regulator, and permanent conforming loan limits up to the greater of $417,000 or 115% local area median home price, capped at $625,500. The effective date for reforms is immediate upon enactment, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008).
View 2009 FHA and GSE loan limit estimates (PDF)

• FHA Reform – including permanent FHA loan limits at the greater of $271,050 or 115% of local area median home price, capped at $625,500; streamlined processing for FHA condos; reforms to the HECM program, and reforms to the FHA manufactured housing program. The downpayment requirement on FHA loans will go up to 3.5% (from 3%). The effective date for reforms is immediate upon enactment, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008).
View 2009 FHA and GSE loan limit estimates (PDF)
FHA Reform Chart (PDF)

• Homebuyer Tax Credit - a $7500 tax credit that would be would be available for any qualified purchase between April 8, 2008 and June 30, 2009. The credit is repayable over 15 years (making it, in effect, an interest free loan).
First-time homebuyer tax credit chart
Frequently asked questions about the first-time homebuyer tax credit

• FHA foreclosure rescue – development of a refinance program for homebuyers with problematic subprime loans. Lenders would write down qualified mortgages to 85% of the current appraised value and qualified borrowers would get a new FHA 30-year fixed mortgage at 90% of appraised value. Borrowers would have to share 50% of all future appreciation with FHA. The loan limit for this program is $550,440 nationwide. Program is effective on October 1, 2008.
FHA Foreclosure Rescue Chart

• Seller-funded downpayment assistance programs – codifies existing FHA proposal to prohibit the use of downpayment assistance programs funded by those who have a financial interest in the sale; does not prohibit other assistance programs provided by nonprofits funded by other sources, churches, employers, or family members. This prohibition does not go into effect until October 1, 2008.
More about the seller-funded downpayment assistance provision
Tips to finding downpayment assistance programs (PDF)

• VA loan limits – temporarily increases the VA home loan guarantee loan limits to the same level as the Economic Stimulus limits through December 31, 2008.

• Risk-based pricing – puts a moratorium on FHA using risk-based pricing for one year. This provision is effective from October 1, 2008 through September 30, 2009.

• GSE Stabilization – includes language proposed by the Treasury Department to authorize Treasury to make loans to and buy stock from the GSEs to make sure that Freddie Mac and Fannie Mae could not fail.

• Mortgage Revenue Bond Authority – authorizes $10 billion in mortgage revenue bonds for refinancing subprime mortgages.

• National Affordable Housing Trust Fund – Develops a Trust Fund funded by a percentage of profits from the GSEs. In its first years, the Trust Fund would cover costs of any defaulted loans in FHA foreclosure program. In out years, the Trust Fund would be used for the development of affordable housing.

• CDBG Funding – Provides $4 billion in neighborhood revitalization funds for communities to purchase foreclosed homes.

More about the CDBG funding provision

• LIHTC – Modernizes the Low Income Housing Tax Credit program to make it more efficient.

• Loan Originator Requirements – Strengthens the existing state-run nationwide mortgage originator licensing and registration system (and requires a parallel HUD system for states that fail to participate). Federal bank regulators will establish a parallel registration system for FDIC-insured banks. The purpose is to prevent fraud and require minimum licensing and education requirements. The bill exempts those who only perform real estate brokerage activities and are licensed or registered by a state, unless they are compensated by a lender, mortgage broker, or other loan originator.

It remains to be seen the overall effect the Recovery Act will have on both the individual home buyer and the housing industry as a whole.

From the Experts:
“We’re going through a major financial crisis…let’s be clear: Fannie and Freddie can’t be allowed to fail. With the collapse of subprime lending, they’re now more central than ever to the housing market, and the economy as a whole.”
            – Paul Krugman, Professor of Economics at Princeton and New York Times columnist, 7/14/2008

Stop Timing the Market and BUY!

By DeeinAustin™

U.S. interest rates fell in February, creating a more brisk real estate market in Austin and other areas of the country.

Sorry to report, but rates are rising almost every week. Buyers are now faced with a common dilemma in today's buyer markets. They often  ask...

"If home prices are still going down, should I wait to purchase until later this year?"

The short answer is no. It's not smart to time the market. My advice to first-time, move-up, and relocating buyers: buy when it's the right home at the right time for you.

THREE REASONS WHY NOW IS A SMART TIME TO BUY

U.S. Housing Market Gloom Lifting?

By Carey Eskridge

While  conventional wisdom has the housing market taking a beating, Texas has been largely immune to the slump that is hitting other parts of the country.

As Dee has pointed out recently, market indicators for San Antonio, Dallas,  Austin, and even Houston may not be the best we've seen in recent years, but there's no "sky is falling" scenario playing out in the Lone Star State. A few recent news items may indicate that recovery is on the way.

Last week saw two bits of potentially good news.

GOOD NEWS FOR THE U.S HOUSING MARKET

First, Freddie Mac reported nearly across-the-board drops in mortgage interest rates. Perhaps most importantly, the average rate on 30-year, fixed-rate mortgage fell to it's lowest point since September 2005, resting at 5.96 percent, but rates on 15-year fixed and 5-year adjustable mortgages also fell.

Feature Interview: Texas Mortgage Market Update

By DeeinAustin™

How's the Texas real estate market? Are we still selling houses? Has the mortgage market gotten better? Is now a good time to buy? Sell?

Yes! Good news is that Texas real estate agents are still selling houses and the mortgage market is on a rebound. In fact, December is often the month for investors and buyers to get the best deals of the year.

The real estate market statistics for October posted last week for most Texas cities, so our team will provide summaries soon.

In the meantime, Mary Stephens, Loan Officer from City Real Estate and Mortgage, provided a Texas mortgage market update. I met Mary on an Austin property tour and she recently stepped in to help one of our investors with a land deal once their lender couldn't come through.

TEXAS MORTGAGE MARKET UPDATE: Q&A WITH MARY STEPHENS

Spotlight Interview: When Will Texas Real Estate Bounce Back?

Ok, so the mortgage market is rough. Summer 2007 was a pretty odd time in American history. Over 120 banks went out of business and the FDIC shut down Netbank for their failed lending practices. My father had many accounts at Netbank, so he's living the nightmare right now. (More on that later).

I interviewed Gray Buffington, a Texas Mortgage Broker that I trust. He's been in the business since 1986 and has followed the market through boom and bust cycles. I asked Gray to tell me the truth on the mortgage market and whether Texas will make it out alive in 2008.

INTERVIEW WITH GRAY BUFFINGTON

Give me some background on how you got started in real estate.

It’s been a venture of 20 years so allow me to make this as succinct as possible! While I was an undergraduate in college I had an opportunity to do an internship with a local bank in Austin. I fell in love with Austin and, upon graduating in 1986, immediately began working for a local Mortgage Company. I formed Buffington Mortgage in 2002 and we’ve quickly risen to become one of Austin’s top lenders, in part due to our focus on pushing the envelope in customer service.

I think Alana (Chandler) is one of the coolest women I’ve ever met. How did you meet her and what’s her role?

Alana had done all commercial art and ad copy for a small Austin company and a few years later they were in stores around the world. Alana’s role as the Marketing Director for Buffington Mortgage is to insure that our message of outstanding service and value is communicated to all of our clients and referral partners.

Here’s the big question. Tell me more about the Texas Mortgage Market. Are things out of control?

Mortgage Rate Fall Creates Rise in Applications

I've been working on the monthly Texas market updates, so checked in on mortgage interest rates.

As you may know, home mortgage rates were decreased by half a point. This is the first decrease since 2003, so now is an even better time to buy. According to Inman News, the most compelling reason for the recent upswing in applications was the large decline in interest rates.

The MBA (Mortgage Banker'ss Association) reported that:

• The average contract interest rate for 30-year fixed-rate mortgages dropped to 6.25 percent from 6.42 percent
• The rate on 15-year fixed-rate loans slid to 5.9 percent from 6.1 percent
• The rate on one-year adjustable-rate mortgages (ARMs) declined to 6.34 percent from 6.52 percent.

This is very good news and confirms what I'd recently explained to a beginning investor that the Federal Reserve learned from the mortgage crashes in the 80s. Banks are much more smart in their overall mix of loan products and mortgage rates are expected to be increased or decreased to spur or slow the real estate market as appropriate.

Read the full report on Inman News.

Read our previous story on how the mortgage fallout created a Buyer's Market in Texas.

Dallas Mortgage Broker Provides Tips for Current Market

I received an email alert from Keller Williams that gave good tips on how to approach the changing real estate market. Both buyers and sellers can still fair well!

Texas sellers were experiencing a very hot market from 2005-2006. Although the investment and relocation markets in Dallas, Houston, Austin and San Antonio are still doing well, sellers must be aggressive in their pricing.

Tom Sherman, President of Mortgage Services Unlimited in Dallas, emphasizes the importance of educating clients. Hot tips for home sellers across the country:

• Home values can stay stagnant or potentially decrease. The inner loop in Houston, Downtown Dallas and Central/South/Lake areas in Austin may be less affected.
• Qualified borrowers are looking for deals.
• Fewer borrowers are qualifying for home loans.
• Rising foreclosures tend to negatively affect home values.
• Increased “days on the market” (DOMs) increases the likelihood that buyers will aggressively negotiate prices down.
• Continued stress in the financial markets will affect consumer confidence.
• Loans may take longer to close.
• Appraisals are becoming more difficult to obtain.
• Properties should be funded before contract contingencies are removed.

It’s critical that sellers price homes to sell -- and sell quickly -- decreasing the need for price reductions. Commercial property sales are actually fairing very well since most lenders typically required 20% down. Condo version opportunities are still popular, for instance.

Houston Real Estate Agent Commits Bank Fraud

I was speaking with an out-of-state investor yesterday about Houston and how great the market is there.

Our team is located in Austin, but we know many areas of San Antonio and Houston just as well. Since he wanted to 'flip' properties, I explained that the Houston market can be better than Austin since it's much larger and more affordable.

One downside to any market is when real estate agents, mortgage brokers and/or appraisers get together to dupe a bank by committing mortgage fraud. A story on MyFoxHouston.com illustrated how the "straw buyer" technique was used in the most recent conviction in Houston.

Link: MyFox Houston | Houston Real Estate Agent Guilty of Bank Fraud.

Check out our previous article on a Texas Mortgage Fraud Case. Also read Mortgage Fraud Makes a Comeback

Texas not too "risky" according to MSN

MSN released some predictions from PMI Mortgage Insurance Company on risk factors in the Top 50 top U.S real estate markets. Like most forecasts, these should not be taken as gospel.

PMI Mortgage Insurance Co.'s new U.S. Market Risk Index tries to assess the future direction of markets across the U.S. by looking at recent price volatility, affordability... and employment, among other factors.

On average, there's a 34.6% chance that home prices will drop in the nation's top 50 markets in the next couple years, with many of the riskiest markets falling in areas that saw steep run-ups in prices in recent years, followed by decreased affordability and drops in the rate of appreciation.

The good news is that Texas cities like Austin, Dallas, Houston and San Antonio were not considered "risky" by comparison with Dallas fairing the worst. My opinion is that any market, in any area can be risky if the buyer makes risky decisions.

See them now! Price risk for the top 50 U.S. markets

 

Mortgage Fallout Creates Buyer's Market in Texas

I've spent the past two days in the Accredited Buyer Representative (ABR) certification course, which is why my posting are late. Well folks, the sky is falling when it comes to loans in Texas (and all across the U.S).

Texas real estate is still very hot, but the seller's market has cooled in most major cities. As you may know, the easier it is to get a loan, the more buyers you have. If it's tougher to get a loan, there are less buyers who are able to purchase a home. With the current mortgage fallout, qualified buyers become a premium and can now better negotiation on the purchase of a home.

WHAT'S THE DEAL WITH LENDERS?

The big problem with lending is that jumbo and stated income loans are extremely tough to obtain unless you have excellent credit, a sizable down payment, and will occupy in the property. So what happened?

• Too many loans with "loose" lending guidelines were issued. These loans often did not require proper income verification, offered investors zero-down or low-down loans, or were otherwise risky.
• Foreclosures and defaults skyrocketed all over the country, partially due to these loans, but also because property values fell during market corrections.
• The result: institutional investors who purchase sub-prime and jumbo loans are running scared.

THE GOOD, BAD and UGLY

The bad is that it will take some time to get a stated income, investor or jumbo loans.

The ugly is that home purchases are falling apart on or before closings because the buyer's loan product is no longer available. Investors and other home buyers should now expect to put 5-20% down.

The good is that you now know about this situation, so tell your friends and family to solidify their loan with an FDIC insured lender before they even go out to look at properties. Sellers should verify the buyer's pre-approval letter, which should be submitted with the offer.