News/Events
Obama administration expands foreclosure prevention program
NEW YORK (CNNMoney) -- The Obama administration is taking another swing at improving its main foreclosure prevention program. The administration said it was expanding eligibility for its Home Affordable Modification Program, known as HAMP, to borrowers with higher debt loads and tripling the incentives it pays banks that reduce principal on loans. The administration also said it would offer incentives to Fannie Mae and Freddie Mac to reduce principal on loans. Previously, the government had only offered incentives to private lenders and banks. The program was also extended to December 2013. It was initially set to expire at the end of this year. The changes were announced in a joint press conference held by Housing and Urban Development Secretary Shaun Donovan, Assistant Treasury Secretary Tim Massad, and White House National Economic Council Director Gene Sperling on Friday afternoon.Originally designed to help some 4 million mortgage borrowers when it was first introduced in February, 2009, HAMP has helped fewer than 1 million homeowners. Has Obama's housing policy failed? With these changes, HAMP is turning into an "all of the above strategy to help responsible homeowners lower their costs and stay in their homes," said Gene Sperling, the Director of the National Economic Council, who also took part in the press conference. Here's a rundown of the new changes:
Expansion of eligibility: HAMP was designed to bring the debt ratio of mortgage borrowers down to 31% of their incomes. Those whose mortgage payments were already below that level had been ineligible for a modification. They may qualify now. The new guidelines will allow for a more flexible approach that takes other debt into account when calculating debt-to-income ratios.Extension of eligibility to owners of rentals properties: The old HAMP rules applied solely to owner-occupied homes but now those who own rental properties may also qualify for a HAMP modification.Triple balance-reduction incentives: The new HAMP will pay between 18 cents and 63 cents for every dollar that lenders take off the mortgage principal, up from between 6 cents and 21 cents.
While the new changes could greatly expand the number of homeowners that receive help from HAMP, it could invite controversy. Subsidizing real estate investors with taxpayer money in a time of rising rents doesn't makes much sense to Anthony Sanders, a real estate professor at George Mason University, for example.
SBA 504 REFINANCE PROGRAM
The Small Business Administration finally rolled out a loan program that could help business owners who face a looming balloon payment on their commercial real estate loans.
Beginning February 28, small-business owners can use the SBA’s 504 program to refinance their commercial mortgages if they face a balloon payment before December 31, 2012. The SBA may later open this option to other business owners.
“We are making this initial restriction to make sure our funding goes first to small businesses with the most need,” said Steve Smits, the SBA’s associate administrator of capital access.
SBA’s 504 loans primarily are used for real estate, but until the Small Business Jobs Act was enacted in late September, they couldn’t be used for refinancing unless a business also was expanding.
Congress added a refinancing option to the 504 program because of the crisis many business owners face due to declining real estate values and the tightening of the commercial real estate financing market. When they took out their current mortgages, most business owners assumed they could refinance the loans before the big balloon payment on the mortgage came due. That’s no longer possible for many of them.
The SBA’s loan programs were created to fill gaps in the lending market for small businesses, so that’s why Congress thought it was appropriate to come to the rescue of these business owners by making $15 billion worth of refinancing available through the 504 program. Since 504 loans, which are made by SBA-approved certified development companies, are paired with first mortgages from conventional lenders, the program will generate nearly $34 billion in total project refinancing over the next two years.
The SBA estimates as many as 20,000 small businesses will take advantage of this refinancing program.
“The economic downturn of recent years and the declining value of real estate have had a significant, negative impact on many small businesses with mortgages maturing within the next few years,” SBA Administrator Karen Mills said. “As a result, even small businesses that are performing well and making their payments on time could face foreclosure because of the difficulties they face in refinancing and restructuring their mortgage debt. This temporary program is another tool SBA can provide to help these small businesses remain viable and protect jobs.”
Borrowers must kick in at least 10 percent of equity in order to qualify for these 504 loans. They will be able to refinance up to 90 percent of the current appraised property value or 100 percent of the outstanding mortgage, whichever is lower, plus eligible refinancing costs. The loans can’t be used for other business expenses.
Applicants also have to be current on their existing loans, and a new independent appraisal will be required on the properties.
Taxpayers won’t be on the hook if these new 504 loans default. All of the costs of this refinancing program will be covered by fees assessed on the loans.
The National Association of Development Companies, which represents the economic development organizations that make 504 loans, expect brisk demand for the refinancing program.
“We have been receiving at least 10 inquiries a week since the refinance provision was announced as part of the Small Business Jobs Act in September,” said Nadco president Chris Crawford. “Small businesses and banks have been clamoring to take advantage of this new, more affordable refinance option as a means to hold on to critical business properties. In many cases, this will mean saving a thriving business from closure if it could not refinance maturing debt. “
Sales of existing single-family homes fell in the third quarter in Fort Lauderdale and Miami, but were up slightly in West Palm Beach, according to figures from Florida Realtors.
Existing condo sales, meanwhile, soared in Miami and West Palm Beach, but fell in Fort Lauderdale.
Prices for homes and condos were down in all three counties, year-over-year.
Fort Lauderdale existing home sales fell 18 percent, to 2,076 in the third quarter from 2,523 in the same quarter last year. The median sales price was down 2 percent, to $209,600 from $212,900 a year ago.
Miami existing home sales slipped 1 percent, to 1,812 from 1,832 a year earlier. The median price was also down 1 percent, to $191,100 from $192,800.
West Palm Beach home sales inched up 2 percent to 2,396 from 2,359. However, the median price was down 7 percent to $226,600 from $244,500.
Miami existing condo sales jumped 43 percent, to 2,527 from 1,763, year-over-year, likely driven by continued downward pressure on prices. The median sales price of a condo in Miami fell to $104,600 from $137,900, a 24 percent drop.
Existing condo sales in Fort Lauderdale were down 8 percent, to 2,459 from 2,671. The median price was down 10 percent, to $73,100 from $81,300 a year ago.
West Palm Beach condo sales fared much better, rising 20 percent in the third quarter, to 2,352 from 1,962. The median price was down 20 percent, to $88,100 from $109,900.
Statewide sales of existing single-family homes fell 7 percent, to 41,122 from 44,451. The median price also fell 7 percent, to $135,200 from $145,300.
Sales of existing condos across the state rose 15 percent, to 16,938 from 14,793. The median sales price fell 21 percent, to $84,000 from $106,000.
“The price decline in the condo market continues to attract domestic and foreign buyers to Florida to take advantage of this buying opportunity,” said Sean Snaith, director of the University of Central Florida’s Institute for Economic Competitiveness. “As the economic recovery continues in Florida – and, in particular, as the labor market improves – the housing market will follow suit.”
Mortgage Rates: Best Execution 30-Year Fixed Jumps to 5.00%
I hope you like broken records! Because in that department we can deliver! It's not a delivery we're happy about but think the repetition will at least serve to add EMPHASIS to the point we hope to have made over the past 20 days or so....
VOLATILITY REIGNS SUPREME! FIND A LIVEABLE RATE AND FEE STRUCTURE, AND GET OUT NOW!
The above "getting out" certainly refers to anyone floating on a late December/early January timeline.
Only a month ago, best execution 30 year fixed mortgage rates were holding between 4.25% and 4.75%. Heck 4.75% was available on Monday morning! But in the past 24 hours, that all changed. The best execution 30yr fixed rate blew through 4.875 and now sits firmly at 5.00%!
Yes we feel this is overdone and rates will probably decline in the future, but it will probably play out in a "fits and starts" manner. This means, if rates do rally, that consumers will face a series of tough decisions at each step lower. Take the improvements and move on or wait it out for lower rates? From that point of view....What MUST be considered BEFORE one thinks about capitalizing on a rates recovery?
- WHAT DO YOU NEED? Rates might not recover as much as you want/need.
- WHEN DO YOU NEED IT BY? Rates might not recover as fast as you want/need.
- HOW DO YOU HANDLE STRESS? Are you ready for MORE VOLATILITY in the bond market.
The bad news is that expected volatility has only been compounded by the "TIME OF YEAR" factor AQ discussed on Monday. Remember this...
I say "this time of year" because it is year-end on Wall Street and investors are generally distracted by holiday events and administrative tasks aimed at cleaning up balance sheets for annual reporting. The resulting effect is less participation in the bond market and increased volatility. If you've been reading the blog lately, that volatility has been obvious.
Seriously... rates can continue making big moves in either direction FASTER THAN YOU CAN CALL/EMAIL/YELL at your lender to get that rate locked! It happened today!! The new best execution par 30 year fixed mortgage rate has moved up to 5.00%. We hope it doesn't stay that way too long, but it looks unlikely we'll see anything better than 4.75% before the New Year.
Important Mortgage Rate Disclaimer: Loan originators will only be able to offer these rates on agency conforming loan amounts to very well qualified borrowers who have a middle FICO score over 740 and enough equity in their home to qualify for a refinance or a large enough savings to cover their down payment and closing costs. If the terms of your loan trigger any risk-based loan level pricing adjustments (LLPAs), your rate quote will be higher. If you do not fall into the "perfect borrower" category, make sure you ask your loan originator for an explanation of the characteristics that make your loan more expensive. "No point" loan doesn't mean "no cost" loan. The best 30 year fixed conventional/FHA/VA mortgage rates still include closing costs such as: third party fees + title charges + transfer and recordation + escrows (things like upfront MIP (if required), property taxes, homeowners insurance, accrued interest)".
