FHA ends the 90 day rule (for one year)

CNBC’s Diana Olick posted on her blog last week that the FHA is lifting its 90 day rule on flipping for one year.

Up to now, a buyer using FHA financing could not buy a home that had sold in the previous 90 days.  The FHA did not want to subsidizing flipping by real estate speculators.  They now realize that investors coming in and buying forclosures or short sales, rehab them and turn around and sell them to first-time homebuyers can actually be good thing.  

There are strings, however.  One condition is that the speculator(s) cannot make more than a 20% profit (in most cases).  Oh, and the transaction must be “arms-length”, no colluding with relatives on this one.

Foreclosure filings down, mortgage applications up

Jen Kuhney of the Daily Transcript reported last week that January foreclosure filings in San Diego County were down in January.  As per reported, “January 2010’s 3,008 notices of default (NOD’s), and trustee deeds filed were 31 percent fewer January 2009 and 37 percent fewer January 2009 and 37 percent down from January 2008.”

In the article, Alan Gin of USD pointed out that we have more demand than supply.  I think that’s true of homes under $800K, but there is a glut of luxury homes out there, especially homes priced over $1,000,000.

Alan Nevin of MarketPointe Realty Advisors, “…said most banks would have wanted  to release their distressed properties on the market since it would negatively affect their capital ratios.  However, since government entities Fannie Mae, Freddie Mac, the FHA and VA control about half the nation’s mortgages, Nevin said they are not pressured to release their distressed assets”.   Agreed.  He also said something that I’ve been saying for months, that lenders are holding on to foreclosed properties to prop up prices.

Bob Willis of Bloomberg reported that the last week of January saw mortgage applications rise by 21% to their highest level in more than a month.  Refi’s increased by 26% while applications for purchases increased by 10%.  Willis thought people on the sidelines may be jumping into the market because they are afraid rates will start to rise once the Fed’s program to support the mortgage markets ends on March 31.

How is my neighborhood doing?

San Diego is an interesting place.  People who visit from out of state assume that this place is just beaches and sunshine, and all the weather is the same.   A little know fact to them is that San Diego County has a number of “micro-climates”.  It can be 63 F and partly-cloudy in Encinitas and sunny and 72 F in Mission Valley, etc. 

Residential real estate in San Diego is the much the same, it’s made up of “micro- markets”. 

Roger Showley of the Union-Tribune did a fine job on breaking down how each neighborhood (see zip code) in San Diego fared last year regarding values.

As far as winners, Escondido (west), El Cajon, Hillcrest/Mission Hills, Escondido (south) and City Heights had the largest percenage increase in values.

The losers?  San Ysidro, Rancho Bernardo (west), Coronado, Imperial Beach and Solana Beach had the largest percentage loss in value. 

As the article points out, there was no clear pattern last year.  The one long-term factor will be how the “shadow” inventory will affect San Diego County’s “micro-markets” in 2010.

A little help at tax time

Kenneth Harney of the Washington Post wrote last week that the “IRS finally published the rules for the repeat purchase credit along with the key details for taxpayers…”

Harney does a great job in again detailing the specifics of the current first-time homebuyer’s and ”step up” buyer’s tax credit. 

He also reminds buyers on the sidelines to get moving.  To take advantage of the credit, you must be in contract no later than April 30, and you must close on or before June 30.

Follow up on possible lender short sale fraud

Diana Olick of CNBC did a follow up on there Realty Check blog a few days ago on the story she broke late last week on alleged short sale fraud by major lenders.

Check out the e-mail Diana got after the story aired:

“And then just a few minutes after the story aired Friday, I received another email from my whistle-blower, Kayte Gentry:

Diana – we thought it funny that this came in about 10 minutes after the 2nd airing of the story…the email is to my Lead Negotiator.

‘Linda,

The agent contribution of $500.00 can’t show on the HUD. Have that removed and resend just the HUD.

If it shows on the HUD the investor thinks they are getting it and not the 2nd lien holder.’

The author of the email reportedly works at Citi // [C  3.2725    0.0025  (+0.08%)   ] // , as her email address shows. I have to believe/hope that she doesn’t even know what she’s demanding is illegal, otherwise I can’t imagine she would put it in an email. This is clearly fraud.”

Ignorance in the business isn’t an excuse. 

Cick here to see Diana’s entire entry.

County Median Prices Up in December

I wrote last week that prices were up in San Diego County in ‘09.  Roger Showley of the UT breaks December’s numbers down. 

Alan Gin of USD thinks prices have stablized, but warned people to be wary of the next couple of months as he sees a possible dip.  I’ll take it a step beyond that, there will be a lot of pressure on prices (to go down) once the shadow inventory really starts hitting this year.  The lenders are going to have to put the homes on the market sometime.

Ross Starr of UCSD backs up what I’ve been saying for months, for people who played by the rules and didn’t get sucked into the frenzy of the mid-2000’s, this is a opportunity of a lifetime to buy, especially for first-time homebuyers.

If that’s the new GFE, it must be 2010

News for everyone contemplating a home loan, as of Jan. 1, the format of the Good Faith Estimate has changed, a LOT!

Because of the turmoil in the mortage industry during the last decade, the Department of Housing and Urban Development has mandated changes in the Good Faith Estimate.  Frankly, the word “estimate” should be removed because much of the information has moved from an “estimate” to being “final” or “almost final”. 

Kenneth Harney gives an accurate rundown on the changes.  The bottom line is, when shopping for a loan, make sure you get a good referral so you know you are working with someone you can trust.

REALLY??!!! Big Banks accused of short sale kickbacks

One of the few shining stars on CNBC is Diana Olick, who is the business cable channel’s main reporter on everything real estate.  Her segment “Realty Check” is always worth listening to.  I’ve been watching her since the summer of ‘07, and she’s been honest and spot on reporting the mortgage meltdown and collapse of the real estate market.

These days, I usually have the sound turned DOWN, except when Diana comes on.  As I turned the sound up this morning, she had breaking news that Big Banks have been accused of taking kick backs to make a short sale close.

It seems to be happening when there is a second involved in the short sale.  The first lienholder does not have to give any money to the lender who holds the second, but according to Diana, first lienholders are compensating the lender in second position for some amount.  That is happening more and more recently.  As Diana said, that’s legal.

What agents have been complaining about recently is that some second lien holders have been requesting cash payments, off the HUD-1 settlement statement, which is a RESPA violation.  Clearly ILLEGAL

One agent taped a conversation with a lender to prove it was happening:

AGENT: Well yes, I don’t want to lose my license, go to jail, I mean, I have to sign…

LENDER: You’re not going to lose your license – we have plenty of realtors who do this, who actually understand how this whole process goes – and they realize that OK, if I want to get this done, this will take place.”

Oh, SNAP!!!  The agent was damned smart to get that on tape.

I can tell you the whole energy of the last 18 months in the lower end of the real estate market has had feeling of the craziness of the refi market 5-6 years ago, so I’m not suprised that something like this has been happening.

Diana contacted several federal agencies alerting them of what she learned.  HUD is VERY interested in seeing her story.  I’ll let you know if Ms. Olick provides any updates on this story.

More foreclosures predicted by RealtyTrac

RealtyTrac is predicting 3 million foreclosures in the US this year, reports Dan Levy of Bloomberg.  The main reason is the failure rate of loan modifications stacked on to 1o percent unemployment.  Let me add my usually drumbeat, the extremely high reset rate on ARM loans, especially Option ARMs.

RealtyTrac said this year should be the peak of the foreclosure wave.  They also said that California, Florida, Arizona and Illinois make account for more than half of the nation’s foreclosure filings.

Although this is bad news for owners, it should be good news for buyers as many more opportunities to own a home will occur.

Rates down, applications up! A good start to ‘10

Courtney Schlisserman of Bloomberg News brought us the good news that mortgage applications rose 14% last week, while mortgage rates fell slightly. 

This may mean people who have been sitting on the sidelines waiting for rates to go ”way down” finally have realized that we are pretty much at the bottom and have wisely decided to the take the plunge and get their refi’s DONE!

With the Federal Reserve’s program on buying mortgage backed assets to keep rates low ending on March 31, the probability that rates will climb this year is pretty high.