Fannie Eases Its Investor Loan Rules
To speed recovery of the housing market, Fannie Mae in March will begin purchasing and guaranteeing mortgages for borrowers carrying loans on as many as nine other properties, up from the current limit of three.
However, the number of months of reserve payments that must be held by investors will rise to six in June from two currently.
“One of the things that leads the economy out of a housing crisis is when prices get cheap enough that investors start moving in and buying things,” says Joe Garrett of the Berkeley, Calif.-based consulting firm Garret, Watts & Co.
Source: American Banker, Harry Terris (02/10/09)
International Interest Grows in U.S. Lending
The Association of Foreign Investors in Real Estate (AFIRE) reports that foreign real estate lenders could grow lending by as much as 58 percent in the United States this year, with interest in cross-border property investing especially robust.
In a recent AFIRE member survey, the top five most attractive U.S. cities in terms of investment dollars were the District of Columbia, New York City, San Francisco, Los Angeles and Houston.
Meanwhile, 53 percent ranked the United States as the nation providing the most secure property investments.
Respondents also listed multifamily housing, office space, industrial properties, retail, and hotels as the top five preferred property types.
Source: National Mortgage News, Bonnie Sinnock (02/09/09)
Short Sale v. Foreclosure
Q: I am thinking of relocating to Miami Beach, as I’ve read that there are deals there. Is it better to negotiate with a short seller or look for houses already owned by the bank? And if I go for the latter, how low should my offer be—and will the lender offer me financing?
![[Short Sale v. Foreclosure]](http://s.wsj.net/public/resources/images/OB-CX855_miamif_D_20090109152155.jpg)
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A: There’s no shortage of distressed properties in Miami Beach. RealQuest.comcurrently lists 442 homes there that are somewhere in the foreclosure process, and 58 that have gone back to the bank. And Fannie Mae just launched a test program that will preapprove short sales, making it easier for buyers like you. However, the program is not available in your area.
But bear in mind that in the case of both short sales and bank-owned homes you are negotiating with lenders rather than sellers. In a short sale, the seller might be desperate to accept any offer to avoid foreclosure, but that doesn’t matter if the primary and junior lien holders don’t agree to it. With bank-owned properties, you will be dealing with the “real-estate owned” or REO department of the lender who took ownership of the house at the auction. In both cases, you should be prepared to be patient, since lenders are overwhelmed with distress sales these days and may take weeks to respond to your offer. According to a survey of real-estate agents conducted in November by Campbell Communications the average wait time to get an answer from a lender on a short sale is 8.1 weeks, up from 4.5 weeks in a survey conducted earlier in 2008.
It’s hard to know whether or not you’ll get a better deal on a short sale or a bank-owned home because the situation varies with each property. Some short sales are priced higher because the seller has junior lien holders who won’t sign off on the deal unless they’re paid something. But some foreclosures are priced higher than corresponding short sales because the bank needs to recover costs for repairs, especially if an angry former owner decided to punch holes in the walls, steal the light fixtures and flush cement down the toilet.
Because the back stories of properties differ, you should begin your quest by finding a buyer broker that specializes in distressed properties (many won’t touch them, since deals typically take a long time to close, and commissions tend to be minimal). A good buyer broker will be able to provide a comparative market analysis that shows sales of similar homes, and may also be able to get a sense from other brokers of prices of pending sales. That’s important to know because lenders are going to try to hold out for fair market value for the home, even in a declining market, and will insist on an appraisal to justify the sales price to their shareholders. The broker should also investigate how long the property has been on the market, what’s owed on it and how many offers it has received.
While it isn’t unusual to see both short sales and bank-owned properties listed at prices far below those offered by traditional sellers, don’t expect them to sell for much more than 20% below asking price, says Fort Lauderdale, Fla., broker Scott Coloney, who has assembled a “foreclosure response team” of financial and legal partners to facilitate distress sales. In fact, properties in good condition and in desirable locations may even spark bidding wars. “So low-balling is a waste of time,” he says.
Moreover, with your bid you’ll have to show that you have the cash to buy the property, or a letter from a lender pre-approving you for a loan. That letter can be from the bank that owns the property—and you’ll probably be taken more seriously as a bidder if it is—but don’t expect the bank to offer you special low financing terms to close the deal.
NAR Backs ‘HOPE For Homeowners’
THE NATIONAL ASSOCIATION OF REALTORS® today announced its support for new legislation introduced by House Financial Services Committee Chairman Barney Frank, D-Mass., that is designed to ease loan modifications and improve refinancing options for America’s troubled home owners by revamping the HOPE for Homeowners program.
“HOPE for Homeowners, was designed to help families refinance into safer, more affordable mortgages, in many cases helping those families avoid a devastating foreclosure,” says NAR President Charles McMillan. “Despite being well-intentioned, the HOPE for Homeowners program has had limited success. Lenders have found the program difficult to participate in because of many of the program’s constraints.
This legislation, H.R. 703, is expected to make the program more lender-friendly, while preserving the benefits to homeowners. It would also limit risks to the FHA fund and to the American taxpayer. This is important legislation and we hope Congress will move forward with it.”
The legislation would also provide access to Troubled Asset Relief Program funds for small institutions and community banks and encourage additional actions to expand mortgage funding capacity in the primary market. “Stabilizing the housing market will help the nation’s economic future,” says McMillan. “H.R. 703, along with other stimulus bills being considered, will go a long way to help families keep their homes.”
NAR continues its push to enact legislation that will help stabilize and stimulate the housing market. Its four-point plan, introduced in November, is designed to spur home sales and stem the rapid rise in foreclosures by lowering mortgage interest rates and unclogging the credit market, extending the home buyer tax credit, making the increased loan limits permanent, and increasing liquidity in the both the commercial and residential real estate market.
NAR expressed support and vowed to work with Congress and the administration to establish strong housing legislation that will help stabilize home values, prevent foreclosures and put the U.S. economy on the road to recovery.
How to Find Money to Invest in Real Estate
These days it’s particularly tough for someone involved in a small-business real-estate venture to find funding.
David Gass, founder of Business Credit Services of Las Vegas, offers these suggestions to real estate entrepreneurs in search of investors or loans.
- Put together financial documentation for your plan. Detail the time and money and “sweat equity” that you’ve already put in, the income potential, and the amount that you’re prepared to invest going forward,. Calculate a profit-and-loss statement that factors in costs for maintenance, repairs, property taxes, and advertising.
- Talk to local bankers first. They are the ones most likely to understand your business.
- Private investors and angel investor networks are another alternative. If you go this route, work with an attorney. “You need a solid structure in place with the right operating agreement to protect all parties,” Gass says.
Source: BusinessWeek.com, Karen E. Klein (02/02/2009)
Rules for Renting to Post-Foreclosure Tenants
Property managers considering renting to someone who lost a home to foreclosure should determine whether a potential tenant was a good renter prior to the foreclosure and could be again.
Maurice Ortiz, marketing director of Apartment People, a Chicago-based apartment-finding service, suggests setting up a procedure to consider applicants with extenuating circumstances individually. He suggests landlords consider these issues:
Did the tenant leave the foreclosure before he was evicted? Taking control of the situation and moving on is a sign of a reliable person who got in trouble because of the wrong mortgage.
Is the potential tenant upfront and honest about his problem? A tenant who admits his situation and explains it is likely to be a reliable tenant.
Ask for full, documented financial disclosure. Make sure the applicant has a job and a steady income and car and credit card loans are paid on time.
Ask for references and check them.
Seek a larger deposit – two months is not out of line – or ask for a lease co-signer.
Source: Chicago Tribune, Sharon Stangenes (01/25/2009)
Builders Offer Ideas for Up-to-Date Kitchens
At the International Builders’ Show last week in Las Vegas, the emphasis was on kitchens.
Builders and designers say that strapped consumers are eating out less and cooking more, which is increasing demand for functional kitchens.
Kitchen trends include:
- Making room for multiple refrigerators, including under-counter models, island refrigerators and column types.
- Considering cost-effective updates, including using limited amounts of expensive tile as a backsplash or accent, eye-catching hardware, and mixed countertops.
- Going green, not only in terms of recycled materials in countertops and floors, but also as a color for walls and other surfaces.
- Houses are shrinking and appliances are getting smaller so they don’t overwhelm the space.
Source: Los Angeles Times, Lauren Beale (01/22/2009)
Disclosing Existing Offers May Help Sellers
When sellers are entertaining more than one offer, it might be in their best interest to have these offers disclosed to prospective buyers.
In some cases, disclosing existing bids prompts other buyers to up their bids or even ignites bidding wars. These days such competition is more likely to occur in the sale of distressed properties.
But if the listing agent solicited the existing offer, he or she may be reluctant to disclose competing bids which could result in a better offer (lessening their own commission.) Or they may simply want to avoid the extra work associated with additional offers.
However, under the NATIONAL ASSOCIATION of REALTORS® Code of Ethics, practitioners should discuss disclosure of existing offers with sellers from the start and ask for permission to make such disclosures. If the seller agrees to have existing offers disclosed, they should be disclosed only if buyers request such information.
Source: Realty Times, Bob Hunt(01/27/2009)
Fed Announces Plan to Reduce Foreclosures
The Federal Reserve will take aggressive action to renegotiate mortgages that are likely to enter foreclosure, Fed Chair Ben Bernanke said in a letter to Congress Tuesday.
Under the program, which only affects mortgages owned by the Fed, the central bank will be able to reduce what a home owner owes on a mortgage, lower the interest rate, lengthen the term on the loan, or take other steps that might persuade home owners to keep paying. Borrowers will deal directly with their mortgage servicer.
The Fed says that the mortgages most likely to be affected are those with loan balances that are more than 125 percent of estimated value of the property.
“It’s a step beyond what FDIC is doing with its own portfolio,” said mortgage expert Alan White, an assistant professor at Valparaiso University School of Law. “Principal write-downs are still the critical issue” in keeping borrowers in their homes.
Source: Washington Post, Neil Irwin and Renae Merle (01/28/2009)
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Highers Group Realty
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