Is My Loan Eligible for Modification Under the Obama Plan?
The Treasury Department recently released a report, which include eligibility requirements to determine which homeowners qualify for relief under the plan. Following are the eligibility requirements as specified in the guidelines:
- Mortgage must have originated on or before January 1, 2009.
- Home must be an owner-occupied primary residence (verified with tax return, credit report, and other documentation such as a utility bill) – this program is not designed for investor-owned properties.
- Home must be a single family 1-4 unit property (including condominium, cooperative, and manufactured home affixed to a foundation and treated as real property under state law).
- Home may not be vacant or condemned.
- Borrowers in bankruptcy are not automatically excluded from consideration.
- Borrowers in active litigation regarding the mortgage loan can qualify for a modification without waiving their legal rights.
- First lien loans must have an unpaid principal balance (prior to capitalization of arrearages) equal to or less than:
- 1 Unit: $729,750
- 2 Units: $934,200
- 3 Units: $1,129,250
- 4 Units: $1,403,400
- Foreclosure actions are suspended during the trial period or while borrowers are considered for alternative foreclosure prevention options. If homeowners fail to qualify, foreclosure proceedings may resume.
- No minimum or maximum LTV ratio for eligibility purposes.
- Loans are eligible for only one loan modification under the program.
- Subordinate liens (such as second mortgages or home equity loans or lines of credit) are not included in the Front-End DTI calculation, but they are included in the Back-End DTI calculation.
- Servicers should follow any existing express contractual restrictions with respect to solicitation of borrowers for modifications.
Applicants will be accepted into the program until December 31, 2012 (the program expiration date), but incentive payments will continue up to five years after the date of entry into the Home Affordable
Modification Program. Monitoring will continue through the life of the program.
Keep in mind that these eligibility requirements are simply government guidelines. Avoid the temptation to qualify or disqualify yourself based solely on what the eligibility requirements indicate. Consult a loan modification specialist who works with lenders on a daily basis to review your situation and determine whether you are likely to qualify. Sometimes the only way to determine whether you qualify is to actually submit your loan modification application.
Real Estate Outlook: Where Housing is Headed
We received an important indicator of where housing is headed last week, when new mortgage applications for home purchases and refinances suddenly surged as they hadn’t in months.
Applications for FHA loans to buy houses were up by 10.4 percent. And overall home purchase applications jumped by 7.1 percent.
Meanwhile mortgage interest rates dropped to their second lowest level in nearly two decades, according to the Mortgage Bankers Association. Thirty year fixed rates averaged 4.96 percent and fifteen year rated dropped to just 4.5 percent.
Why’s this important? New financing applications to buy homes obviously point to rising purchase contracts and closed sales in the months ahead. They also suggest that prices have hit a level in many markets that is attracting once-hesitant buyers off the sidelines.
There’s still another factor that’s likely at work here as well: Congress’s recent improvements to the home purchase tax credit — pushing it to $8,000 from $7,500 and making it non-repayable. George Ratiu, research economist for the National Association of Realtors, says the big jump in loan applications could be tied to the improved credit in the stimulus package signed into law last month.
“Consumers may be responding to the stimulation” effect of the better credit for 2009, he said.
But let’s be clear here: A rise in home purchase applications does NOT suggest we’ve turned the corner in the cycle or have solved the multiple challenges facing markets around the country — high foreclosure levels, continuing domination in some areas of REO and short sales, and continuing increases in the unemployment rate.
Even amid these problems, however, there are some hints of possible improvements ahead. For example, a new study by research firm Realty Trac and USA Today found that despite the constant headlines about record levels of foreclosures, the more closely you look, the more you find that those numbers are highly concentrated in a relatively small number of counties.
More than half of the nation’s foreclosures in 2008, researchers found, were concentrated in just 35 counties in 12 states. You can guess where: California, Las Vegas, Phoenix and Florida.
But the really eye-opening finding: In more than 650 other counties, representing one fifth of all markets in the U.S., foreclosure numbers have actually declined since 2006.
Foreclosures are horrible no matter where they occur. But the fact is: Huge portions of the United States have NOT been seeing record foreclosures, short sales or even serious property value declines. They’re doing better.
Foreclosures Pull Houston Home Prices Down Again In February
Month brings declining sales volume and continued demand for rental properties
HOUSTON — (March 17, 2009) — February marked another month of sagging real estate sales and pricing for the greater Houston area, following to a milder degree the trends that have played out around the country since the recession began more than a year ago. Overall February property sales fell 25.9 percent compared to February 2008, and sales of single-family homes declined by 24.6 percent, according to new monthly data prepared by the Houston Association of REALTORS® (HAR).
The average price of a single-family home in Houston dropped 10.5 percent last month to $182,316 compared to February 2008. At $138,970, the February single-family home median price – the figure at which half of the homes sold for more and half sold for less – fell 8.0 percent year-over-year. February marked the fifth consecutive month of price declines.
Sales of foreclosure properties, which typically sell below market prices, continued to place a drag on home prices last month. In February 2009, foreclosures made up 28.0 percent of all single-family home sales in the Houston area compared to 22.6 percent one year earlier. However that is an improvement from January’s 34.0 percent share of single-family homes sales consisting of foreclosures. Part of that is attributed to a 23.0 percent month-over-month increase in overall property sales.
The median price of foreclosure sales reported in the MLS tumbled 15.0 percent from $94,000 to $79,900 on a year-over-year basis. The median price of traditional, non-foreclosure single-family homes dropped just 1.2 percent from $167,000 to $165,000.
Sales of all property types in Houston for January totaled 3,995, off 25.9 percent compared to February 2008. Total dollar volume for properties sold during the month was $710 million versus $1.0 billion one year earlier, a 33.4 percent decline.
Demand for rental properties rose again in February, with leases of single-family homes up 4.3 percent on a year-over-year basis and leases of high rise units up 192.0 percent. The latter figure tends to be more variable because of the comparatively small number of units involved.
“Rentals remain a very attractive option for would-be home buyers throughout the Houston area who may be reluctant or unable to commit to the purchase of a home at this time,” said Vicki Fullerton, HAR chair and broker of record at RE/MAX of The Woodlands & Spring. “Consumers want to see signs that economic recovery is taking hold, and despite the recent progress made in Washington, we know that’s not going to happen overnight.”
More details http://www.har.com/mls/dispPressRelease.cfm
How much does a foreclosure cost?
Plenty of people are concerned about the cost of bailing out Main Street – the people who stand to lose their homes in the midst of the current financial crisis. Many feel that it’s not the job of the federal government to bail out homeowners who cannot afford their monthly mortgage payments. After all, those people took out risky loans. They are the ones who signed the loan documents. They are the irresponsible borrowers running this country into the ground.
For a moment, let’s ignore the question of who’s at fault. There’s plenty of blame to go around. For now, let’s consider what it costs when homeowners are allowed to lose their homes to foreclosure and who ends up with the bill.
According to a report by the Joint Economic Committee of Congress, the average foreclosure cost amount to about $151,000, with several parties picking up the tab:
Homeowner: $7,000
Lender: $50,000
Local government: $19,000
Impact on neighboring home values: $75,000
Estimated total cost of one foreclosure: $151,000
This doesn’t even account for other potential costs, including the cost of lost productivity, a reduction in a family’s purchase power, lost federal income taxes, and the emotional and psychological costs of losing a home and losing friends and neighbors.
Although neighboring home values usually take the biggest hit as a group, the lender stands to lose the most as an individual party. The Mortgage Bankers Association (MBA) released a policy report in May, 2008, in which it supports the fact that lenders are often the biggest losers in foreclosure: “While losses can vary widely, several independent studies find them to be generally quite significant: over $50,000 per foreclosed home or as much as 30 to 60 percent of the outstanding loan balance.”
Multiply these losses by the estimated 250,000 homeowners who are likely to lose their homes to foreclosure every three months, and we’re looking at over $120 billion in losses annually.
Now, bailing out Main Street doesn’t seem like such a costly proposition. In fact, not bailing out Main Street could be the most costly option of all.
The Houston Real Estate Market Opens 2009 With Weakened Performance as the US recession drags on
FORECLOSURES DRIVE HOME PRICES DOWN, RENTAL DEMAND IS RISING.
HOUSTON — (Feb 17, 2009) — Property sales throughout the greater Houston area stayed in negative territory during the first month of 2009, reflecting the lingering effects the nation’s recession is having on consumer confidence. Overall January property sales fell 26.4 percent compared to January 2008, and sales of single-family homes declined by 22.7 percent, according to new monthly data compiled by the Houston Association of REALTORS® (HAR).
The average price of a single-family home in Houston dropped 12.8 percent last month to $164,922 compared to January 2008. At $127,850, the January single-family home median price – the figure at which half of the homes sold for more and half sold for less – fell 8.5 percent year-over-year. January marked the fourth consecutive month of price declines.
Much of the pricing drop can be attributed to an increase in foreclosure sales, which typically sell below market prices. In January 2009, foreclosures made up 34.0 percent of all single-family home sales in the Houston area compared to 25.0 percent one year earlier. The median price for foreclosure sales reported in the MLS tumbled 23.0 percent from $104,000 to $80,500 on a year-over-year basis. The median price of traditional, non-foreclosure single-family homes dropped just 1.0 percent from $157,000 to $155,500.
Sales of all property types in Houston for January totaled 3,240, off 26.4 percent compared to January 2008. Total dollar volume for properties sold during the month was $530 million versus $817 million one year earlier, a 35.1 percent decline.
January brought a continued escalation in demand for rental properties, with leases of single-family homes up 4.8 percent and townhouses/condominiums up 24.6 percent on a year-over-year basis. This suggests that consumers who otherwise might purchase a home are instead opting to lease in order to enjoy the feel of homeownership without the financial obligations associated with a mortgage.
“ Passage of the economic stimulus package will by no means trigger a home buying frenzy, but eliminating the repayment provision in the first-time home buyer tax credit will help bring buyers to the market and further reduce housing inventory,” said Vicki Fullerton, HAR chair and broker of record at RE/MAX of The Woodlands & Spring. “Restoring consumer confidence is vital to healing our economy, and Congress and the president have just taken an historic step toward initiating that process.”
January Monthly Market Comparison
The month of January brought Houston’s overall housing market negative results when all listing categories are compared to January of 2008. Total property sales and total dollar volume fell, as did average and median single-family home sales prices.
However, the number of available properties, or active listings, at the end of January fell 12.9 percent from January 2008 to 44,178. That is 430 more active listings than December 2008 and considered an indication that inventory levels remain balanced.
Month-end pending sales – those listings expected to close within the next 30 days – totaled 3,216, which was 24.7 percent lower than last year and suggests another month of declining sales for February. The month’s inventory of single-family homes for January came in at 5.7 months, down 4.1 percent from one year earlier and unchanged from December, which marked the lowest level of 2008. The national month’s inventory of single-family homes is approximately 10 months, according to the National Association of REALTORS® (NAR).
Single-Family Homes Update
At $164,922, the average sales price for single-family homes dropped 12.8 percent from January 2008, when it was $189,143. The median price of single-family homes in January was $127,850, off 8.5 percent from one year earlier. That compares to the national single-family median price of $174,700 reported by NAR. These data continue to demonstrate the higher value and lower cost of living that prevail in the Houston market.
Additionally, January sales of single-family homes in Houston came in at 2,827, down 22.7 percent from January 2008 and accounting for the 17th consecutive monthly drop. Year-over-year sales of single-family homes priced at $80,000 and below rose 11.2 percent in January, fueled largely by foreclosure-related transactions.
HAR also reports existing home statistics for the single-family home segment of the real estate market. In January 2009, existing single-family home sales totaled 2,367, a 19.6 percent decrease from January 2008. At $147,646, the average sales price for existing homes in the Houston area fell 14.5 percent compared to last year. The median sales price of $117,000 for the month was also down 8.6 percent from one year earlier.
Townhouse/Condo Update
The number of townhouses and condominiums sold in January fell compared to one year earlier. In the greater Houston area, 203 units were sold last month versus 348 properties in January 2008, translating to a 41.7 percent decrease in year-over-year sales.
The average price of a townhouse/condominium dipped to $153,773, down 3.2 percent from one year earlier. The median price dropped 2.1 percent to $125,000 from January 2008 to January 2009.
Lease Property Update
Demand for single-family and townhouse/condominium rentals increased again in January. Single-family home rentals rose 4.8 percent in January compared to a year earlier, while year-over-year townhouse/condominium rentals were up 17.0 percent.
Houston Real Estate Milestones in January
Sales of single-family homes priced at or below $80,000 increased 11.2 percent, driven largely by foreclosure activity;
Single-family home rentals rose 4.8 percent;
Townhouse/condominium rentals increased 17.0 percent;
Month’s inventory of single-family homes remained unchanged from December 2008, holding at the lowest level since March 2007 (5.7 months) and nearly half the national average of approximately 10 months;
Active listings fell 12.9 percent, representing a balanced supply of housing inventory.
