By Brian Summerfield, Online Editor, REALTOR® Magazine
A new survey conducted by WSL/Strategic Retail shows families in many parts of the country can’t even live comfortably on a six-figure household income. Additionally, more than half of respondents say they’re struggling just to meet their basic needs.
The study asked participants to put themselves in one of four categories:
▪ I can’t even afford the basics.
▪ I can barely afford the basics and nothing else.
▪ I can afford the basics plus some extras.
▪ I can afford the basics and the extras, and I’m able to save, too.
Nearly a third of American households earning between $100,000-150,000 report that they can only afford the basics; $150,000 seems to be a threshold of sorts, as 88 percent of households earning this amount say they can buy the basics and extras, then save money. But that’s also a great deal of money — about three times the median income in the United States — and fewer than 10 percent of all households earn that much. Continue reading »
FHA is lowering its mortgage insurance premiums to help borrowers refinance into lower interest rates, President Barack Obama announced yesterday in a national press conference at the White House. The initiative also includes help to members of the military who’ve been wrongly foreclosed on or denied a chance to refinance.
Under the FHA initiative, the agency is reducing its up-front premium to .01 percent, from 1 percent, for streamlined refinancings of loans originated prior to June 1, 2009, and cutting the annual fee for these refinancings in half, to .55 percent, from 1.15 percent.
The Administration says the two fee reductions together should save the typical FHA borrower about a thousand dollars a year, which is “on top of the savings that they’d also receive from refinancing,” President Obama said at the press conference. “That would make refinancing even more attractive to more families. It’s like another tax cut that will put more money in people’s pockets. We’re going to do this on our own. We don’t need congressional authorization to do it.”
In a scenario of how this would work provided by the White House, a typical FHA borrower with $175,000 outstanding on a mortgage would be able to reduce the monthly payments to $915 a month, assuming a new mortgage at 4 percent. Without the fee reduction, the monthly payment after a refi would be $1,010 a month.
The fee cuts begin June 11. (Details from HUD.)
President Obama used the press conference to urge Congress to pass elements of a broader housing assistance proposal he outlined in his State of the Union speech in January and which was subsequently fleshed out a few weeks later in another address. That proposal would apply the administration’s existing HARP program (Home Affordable Refinance Proposal) to all loans, not just those backed by Fannie Mae and Freddie Mac. To pay for that expansion of the program, a fee would be charged to the country’s largest banks, which received public help after the mortgage crisis hit a few years ago.
Under HARP, lenders agree to modify mortgages, even if the borrower is underwater, as long as certain requirements are met.
Under the assistance to home owners in the military, the administration says it will take the following five steps:
1. Conduct a review of every servicemember foreclosed upon since 2006 and provide any who were wrongly foreclosed upon with compensation equal to a minimum of lost equity, plus interest and $116,785;
2. Refund to servicemembers money lost because they were wrongfully denied the opportunity to reduce their mortgage payments through lower interest rates;
3. Provide relief for servicemembers who are forced to sell their homes for less than the amount they owe on their mortgage due to a permanent change in station;
4. Pay $10 million dollars into the Veterans Affairs fund that guarantees loans on favorable terms for veterans; and
5. Extend certain foreclosure protections afforded under the Servicemember Civil Relief Act to servicemembers serving in harm’s way.
Read a transcript of the President press conference yesterday.
A webinar on Thursday, March 8, will walk you through the new My. Realtor.org, which will be replacing REALTOR.org.
There’s a wealth of information that can be of value to you in your real estate business on Realtor.org, but finding it isn’t always easy. We’re hoping that will change soon. A new version of the website will be launching soon and the goal of the change is to make it more intuitive for you to use.
Organizing information in the best possible way is the challenge of all websites. That challenge becomes especially important when you have so much information, as Realtor.org does.
There are tens of thousands of pages of information on the site, much of it valuable to your business. But knowing what’s there and how to access it can be a challenge, in part because the information has been organized along traditional lines. If NAR’s Research division produces a report on what buyers and sellers want in a home and in a real estate professional, for example, that report typically is accessible on the Research division’s portion of the website and also on the site’s online store.
If you know that NAR’s Research division produced the report or that it’s available for sale, then you might go directly to the Research portion of the site or to the store to get the report.
But if you had only a vague idea that the report’s available and you don’t know who produced it, or whether it’s available for sale, finding the report wouldn’t necessarily be that easy.
It’s one of the goals of the revamping of the website that finding information like that will be a little easier, because the site content will be organized by topic, not by the division that produced it. So, if you heard NAR has a report that has data on what buyers and sellers want in a home and in a real estate professional, you could just go to the home page and in the search box simply ask, “What do buyers and sellers want?” and the report should come up high on the list.
The goal is also to enable you to customize the information that’s showcased on the site. So, once you log in, you can pick what topics you’re most interested in, and the site’s home page will reflect that. Of course, important news will remain at the top of the page, too, because NAR, as your association, needs to keep you informed of important developments as they happen.
To learn more about these changes and also how you can provide input while these changes are being made, attend a webinar we’re hosting Thursday, March 8, at 3 p.m. Eastern Time. It’s free, lasts about an hour, and you can send in questions during the event. There will probably only be time for a few questions to be answered, but all of the questions will be recorded, so the developers who are making the site changes will know what’s not clear to you. And that’s valuable as they complete the site revamping.
Speakers will be the web specialists who are overseeing the site changes.
There’s been considerable interest in the media in FHA’s financial position. The agency recently announced several increases to the premiums it charges borrowers to have their mortgage guaranteed by the agency. Those increases, along with some reports that FHA might request federal funds to shore up its reserves, make it seem like the agency is navigating a rocky period.
It is, but the agency is acting prudently and won’t need an influx of taxpayer funds this fiscal year, so its 78-year record of never having to request funds remains intact. Nor is there reason to believe right now they’ll need to ask for funds in fiscal 2013 or beyond, analysts say.
On the premium increases, the 0.10 percent hike that takes effect April 1 is mandated by law as part of the bill Congress passed at the end of 2011 to extend the payroll tax vacation. That bill required an increase in the guarantee fee that Fannie Mae and Freddie Mac charge banks for guaranteeing loans. Congress included the FHA increase in the bill, too, at least in part to create parity with Fannie and Freddie, NAR analysts say.
Another FHA premium increase, of 0.25 percent, is limited to jumbo loans, and another increase, of 0.75 percent, is specifically for helping the agency’s reserves.
With these increases and with funds the agency will receive from the “robo-signing” settlement with large banks the federal government announced a few weeks ago, the agency has enough funds to replenish its reserves for fiscal year 2012, NAR analysts say.
Does this mean FHA will be in trouble again next fiscal year, which starts in October? NAR analysts say it’s too soon to tell. The recent drain on the agency’s reserves stems in large measure from the loans originated shortly after the housing downturn, when the availability of mortgage financing was at its worst and borrowers flocked to the agency. It’s now working through those loans. But looking ahead, things probably won’t be so bad, in part because the loans it backed from mid-2009 to now are among its strongest ever, so defaults could drop accordingly.
In any case, the pressures on the agency’s reserves aren’t just from defaults; they’re from continuing weakness in home prices. As long as prices stay weak, the agency has to hold more money in its reserves. So, the pressure on reserves isn’t solely because of losses but because of high reserve requirements in the face of struggling prices.
More fundamentally, it’s easy to lose sight of just how much in reserves the agency has. Unlike banks, which hold one year of reserves for the loans they carry, FHA has to hold 30 years’ worth. So, when the agency says its reserves are dipping, that dipping is happening in the context of reserves equivalent to 30 years for each of the mortgages it covers. That means its reserves amount to something like almost $38 billion. That’s money it still has.
On top of that, FHA maintains a second reserve account of 2 percent of its 30-year reserve amount. It’s this 2-percent reserve that’s been dipping.
So, to put this all in perspective, the agency continues to have tens of billions of dollars, but while it’s working through the loans it supported right after the mortgage crisis, it’s feeling pressure on its 2-percent reserve account, and part of that pressure comes not from losses but higher reserve requirements while prices stay dormant.
Once the agency works through this tough period, NAR would like to see it revisit its fee increases and lower them as appropriate.