January Pending Home Sales Fall to Record Low – But, Up in West
The National Association of Realtors reported today that seasonally adjusted index of pending sales contracts fell 7.7 percent to 80.4 in January.
The index, which started in 2001, tracks signed contracts to buy previously owned homes. Typically there is a one- to two-month lag between a contract and a done deal, so the index is a barometer for future home sales.
Here in the West, due to bank foreclosures, the index was up more than 2 percent from December. Some think the foreclosure sales are way below the real home market values. However, as sales activity shows, it would seem to indicate that the market place is working, and the foreclosure sales ARE the true home market values! Just ask anyone trying to sell a home in San Diego that is not a foreclosure or short sale!
San Diego downtown real estate
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Questions and Answers for Borrowers about the
Homeowner Affordability and Stability Plan
Check with your advisor on the as many details may change by the scheduled March 4th release of the full details on this plan.
Borrowers Who Are Current on Their Mortgage Are Asking:
1. What help is available for borrowers who stay current on their mortgage payments but have seen their homes decrease in value?
Under the Homeowner Affordability and Stability Plan, eligible borrowers who stay current on their mortgages but have been unable to refinance to lower their interest rates because their homes have decreased in value, may now have the opportunity to refinance into a 30 or 15 year, fixed rate loan. Through the program, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they hold in their portfolios or that they placed in mortgage backed securities.
2. I owe more than my property is worth, do I still qualify to refinance under the Homeowner Affordability and Stability Plan?
Eligible loans will now include those where the new first mortgage (including any refinancing costs) will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less you may qualify. The current value of your property will be determined after you apply to refinance.
3. How do I know if I am eligible?
Complete eligibility details will be announced on March 4th when the program starts. The criteria for eligibility will include having sufficient income to make the new payment and an acceptable mortgage payment history. The program is limited to loans held or securitized by Fannie Mae or Freddie Mac.
4. I have both a first and a second mortgage. Do I still qualify to refinance under the Homeowner Affordability and Stability Plan?
As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible to refinance under the Homeowner Affordability and Stability Plan. Your eligibility will depend, in part, on agreement by the lender that has your second mortgage to remain in a second position, and on your ability to meet the new payment terms on the first mortgage.
5. Will refinancing lower my payments?
The objective of the Homeowner Affordability and Stability Plan is to provide creditworthy borrowers who have shown a commitment to paying their mortgage with affordable payments that are sustainable for the life of the loan. Borrowers whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments. Borrowers who are paying interest only, or who have a low introductory rate that will increase in the future, may not see their current payment go down if they refinance to a fixed rate. These borrowers, however, could save a great deal over the life of the loan. When you submit a loan application, your lender will give you a "Good Faith Estimate" that includes your new interest rate, mortgage payment and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.
6. What are the interest rate and other terms of this refinance offer?
The objective of the Homeowner Affordability and Stability Plan is to provide borrowers with a safe loan program with a fixed, affordable payment. All loans refinanced under the plan will have a 30 or 15 year term with a fixed interest rate. The rate will be based on market rates in effect at the time of the refinance and any associated points and fees quoted by the lender. Interest rates may vary across lenders and over time as market rates adjust. The refinanced loans will have no prepayment penalties or balloon notes.
7. Will refinancing reduce the amount that I owe on my loan?
No. The objective of the Homeowner Affordability and Stability Plan is to help borrowers refinance into safer, more affordable fixed rate loans. Refinancing will not reduce the amount you owe to the first mortgage holder or any other debt you owe. However, by reducing the interest rate, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.
8. How do I know if my loan is owned or has been securitized by Fannie Mae or Freddie Mac?
To determine if your loan is owned or has been securitized by Fannie Mae or Freddie Mac and is eligible to be refinanced, you should contact your mortgage lender after March 4, 2009.
9. When can I apply?
Mortgage lenders will begin accepting applications after the details of the program are announced on March 4, 2009.
10. What should I do in the meantime?
You should gather the information that you will need to provide to your lender after March 4, when the refinance program becomes available. This includes:
information about the gross monthly income of all borrowers, including your most recent pay stubs if you receive them or documentation of income you receive from other sources
your most recent income tax return
information about any second mortgage on the house
payments on each of your credit cards if you are carrying balances from month to month, and
payments on other loans such as student loans and car loans.
Borrowers Who Are at Risk of Foreclosure Are Asking:
1. What help is available for borrowers who are at risk of foreclosure either because they are behind on their mortgage or are struggling to make the payments?
The Homeowner Affordability and Stability Plan offers help to borrowers who are already behind on their mortgage payments or who are struggling to keep their loans current. By providing mortgage lenders with financial incentives to modify existing first mortgages, the Treasury hopes to help as many as 3 to 4 million homeowners avoid foreclosure regardless of who owns or services the mortgage.
2. Do I need to be behind on my mortgage payments to be eligible for a modification?
No. Borrowers who are struggling to stay current on their mortgage payments may be eligible if their income is not sufficient to continue to make their mortgage payments and they are at risk of imminent default. This may be due to several factors, such as a loss of income, a significant increase in expenses, or an interest rate that will reset to an unaffordable level.
3. How do I know if I qualify for a payment reduction under the Homeowner Affordability and Stability Plan?
In general, you may qualify for a mortgage modification if (a) you occupy your house as your primary residence; (b) your monthly mortgage payment is greater than 31% of your monthly gross income; and (c) your loan is not large enough to exceed current Fannie Mae and Freddie Mac loan limits. Final eligibility will be determined by your mortgage lender based on your financial situation and detailed guidelines that will be available on March 4, 2009.
4. I do not live in the house that secures the mortgage I’d like to modify. Is this mortgage eligible for the Homeowner Affordability and Stability Plan?
No. For example, if you own a house that you use as a vacation home or that you rent out to tenants, the mortgage on that house is not eligible. If you used to live in the home but you moved out, the mortgage is not eligible. Only the mortgage on your primary residence is eligible. The mortgage lender will check to see if the dwelling is your primary residence.
5. I have a mortgage on a duplex. I live in one unit and rent the other. Will I still be eligible?
Yes. Mortgages on 2, 3 and 4 unit properties are eligible as long as you live in one unit as your primary residence.
6. I have two mortgages. Will the Homeowner Affordability and Stability Plan reduce the payments on both?
Only the first mortgage is eligible for a modification.
7. I owe more than my house is worth. Will the Homeowner Affordability and Stability Plan reduce what I owe?
The primary objective of the Homeowner Affordability and Stability Plan is to help borrowers avoid foreclosure by modifying troubled loans to achieve a payment the borrower can afford. Lenders are likely to lower payments mainly by reducing loan interest rates. However, the program offers incentives for principal reductions and at your lender’s discretion modifications may include upfront reductions of loan principal.
8. I heard the government was providing a financial incentive to borrowers. Is that true?
Yes. To encourage borrowers who work hard to retain homeownership, the Homeowner Affordability and Stability Plan provides incentive payments as a borrower makes timely payments on the modified loan. The incentive will accrue on a monthly basis and will be applied directly to reduce your mortgage debt. Borrowers who pay on time for five years can have up to $5,000 applied to reduce their debt by the end of that period.
9. How much will a modification cost me?
There is no cost to borrowers for a modification under the Homeowner Affordability and Stability Plan. If you wish to get assistance from a HUD-approved housing counseling agency or are referred to a counselor as a condition of the modification, you will not be charged a fee. Borrowers should beware of any organization that attempts to charge a fee for housing counseling or modification of a delinquent loan, especially if they require a fee in advance.
10. Is my lender required to modify my loan?
No. Mortgage lenders participate in the program on a voluntary basis and loans are evaluated for modification on a case-by-case basis. But the government is offering substantial incentives and it is expected that most major lenders will participate.
11. I'm already working with my lender / housing counselor on a loan workout. Can I still be considered for the Homeowner Affordability and Stability Plan?
Ask your lender or counselor to be considered under the Homeowner Affordability and Stability Plan.
12. How do I apply for a modification under the Homeowner Affordability and Stability Plan?
You may not need to do anything at this time. Most mortgage lenders will evaluate loans in their portfolio to identify borrowers who may meet the eligibility criteria. After March 4 they will send letters to potentially eligible homeowners, a process that may take several weeks. If you think you qualify for a modification and do not receive a letter within several weeks, contact your mortgage servicer or a HUD-approved housing counselor. Please be aware that servicers and counseling agencies are expected to receive an extraordinary number of calls about this program.
13. What should I do in the meantime?
You should gather the information that you will need to provide to your lender on or after March 4, when the modification program becomes available. This includes
information about the monthly gross income of your household including recent pay stubs if you receive them or documentation of income you receive from other sources
your most recent income tax return
information about any second mortgage on the house
payments on each of your credit cards if you are carrying balances from month to month, and
payments on other loans such as student loans and car loans.
14. My loan is scheduled for foreclosure soon. What should I do?
Contact your mortgage servicer or credit counselor. Many mortgage lenders have expressed their intention to postpone foreclosure sales on all mortgages that may qualify for the modification in order to allow sufficient time to evaluate the borrower's eligibility. San Diego real estate agents
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INFO THAT HITS US WHERE WE LIVE Last Wednesday, January existing home sales came in down 5.3%, to an annual rate of 4.49 million. The supply went to 9.6 months, but that was all because of the slower pace of sales. In fact, the raw inventory of both single family homes and condos/co-ops DECLINED. The inventory of existing homes has now been reduced by one million homes since its peak last July.
Thursday, new single-family home sales came in at a 309,000 annual rate, a bit slower than expected. Because of this slow pace, inventory increased to 13.3 months. But the total inventory of unsold new homes has dropped dramatically – to 341,000 homes, down 40.2% from its record peak in 2006. The new homes inventory is now below the 355,000 average of the last 25 years.
We also saw the Case-Shiller home price index down 2% for December and down 18.5% versus a year ago. The media jumps all over this index, but it focuses on homes in major metro areas, so it isn't a true average for the country. For a truer look at the overall situation, we might want to consider the Federal Housing Finance Agency (FHFA) numbers, which concentrate on homes with conforming mortgages. Sales of these homes showed a PRICE GAIN of 0.1% in December and only an 8.7% drop from a year ago. Some experts feel many areas of the country are close to or already have hit bottom.
>> Review of Last Week
STAYING ABOVE 7000…It wasn't a great week in the markets, with the major indexes slipping just over 4%. The Dow happily stayed above 7000, a psychological victory of sorts, since both the Dow and the S&P 500 finished at 11-year lows. The week began with a low Consumer Confidence reading and ended with Friday's revised Q4 GDP of –6.2%. This was bigger than predicted and the media jumped all over "the worst GDP reading in a quarter century." They were referring to Q1 1982 GDP, which was actually –6.4%, meaning we're still not as bad off as we were in the Reagan recession.
Real disposable personal income was up 3.4% in Q4, indicating people have money, they're just hesitant to spend it. Other positive news included the Chicago PMI (Purchasing Managers Index) coming in UP over last month. This forward-looking indicator is a good si gn, as is University of Michigan Consumer Sentiment, which also came in better than expected. The most encouraging signs came from our leaders. Fed Chairman Ben Bernanke told Congress Tuesday there is a "reasonable prospect" the current recession will end this year and that 2010 will be a year of recovery. That evening, the President told a joint session of Congress, the nation and the world: "We will rebuild, we will recover and we will emerge stronger than before."
Efforts to fix the financial system included the announcement Wednesday of the administration's Capital Assessment Program. CAP will provide banks with capital in exchange for stock, if they go through a "stress test" to determine the need for those funds. Friday, the Treasury agreed to hike its stake in Citigroup to 36%.
The week saw the Dow fall 4.1%, to 7062.93; the S&P 500 went down 4.5%, to 735.09; and the NASDAQ slid 4.4%, to 1377.84.
The bad week in stocks was matched, uncharacteristically, by a bad week in bonds. Uncertainty about the cost of all the bailouts is weighing on prices. The price of the benchmark 10-year Treasury went down, so its yield, which runs counter to price, went up to 3.030%. Mortgage rates, however, remain at very attractive levels.
>> This Week’s Forecast
GOT JOBS?… We'll find out the latest employment story in Friday's Jobs Report. Pending Home Sales will be the topic on Tuesday. AIG is supposed to announce quarterly earnings (no date yet confirmed), but no one's expecting to throw a party over that one. Other indicators will continue to scope out the economic situation.
>> The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months. Economists believe the Fed is unlikely to move rates from their rock bottom level during the first half of the year. Things could change in the second half if the economy and inflation start perking up.
Current Fed Funds Rate: 0%–0.25%
This post information was provided by: Greg Brooks southwest area manager San Diego Mortgage Network (800) 287-8292 x 225 San Diego homes for sale
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