About 13,000 REALTORS® are expected to be at the Washington Monument on Thursday, May 17, for the Rally to Protect the American Dream. If you can’t be one of them, you can participate virtually—and we hope you do. Participating in the virtual rally is easy and should be fun, too. But more than that, it’s important for advancing REALTORS®’ federal legislative and regulatory agenda in the months ahead. Because you can contact your members of Congress from the virtual rally site. Letting them know you care about home ownership is a big part of what the Rally is all about.
Here’s how the virtual rally works. On Wednesday, May 16, go to www.RealtorRally.org, and add your name to a map of the United States. You’re basically checking in to the virtual rally and letting your colleagues and friends know you’re participating with the 13,000 REALTORS® who will be at the Washington Monument.
On the site you can do a lot of things, including tweeting and adding posts to Facebook. And you can let your senators and your congressperson know that you’re as much a part of the Rally as those who are in Washington in person.
On the day of the Rally, there will be lots to do—videos, pictures, and more.
On the day after the Rally, there will be a fun FanCam image posted. If you’re not familiar with what that is, it’s a wide-angle image that essentially captures every person at a big event like the Super Bowl. Even if there’s 100,000 people at the event, the image captures each one, so on RealtorRally.org you can click on each person to get a snapshot of each one. It’s quite a momento from the event.
We hope to see you at the Rally—in -person if possible but virtually if not. Attending virtually is a great way to show you share your colleagues’ effort to protect home ownership as central to our country’s priorities.
How does the virtual rally work? Watch the 90-second video above to see.
Why the Northern Virginia Association of REALTORS® will be at the Rally in force.
NAR President Moe Veissi told a panel of U.S. senators yesterday that the last thing the housing market needs right now is another reason for lenders to decline your client’s mortgage loan application.
“Tight lending standards remain a problem,” he told the members of the U.S. Senate Banking Committee subcommittee on economic policy, “and we don’t want to give a lender another excuse not to approve a loan.”
The Senate panel was looking at long-term reauthorization and reform of the National Flood Insurance Program. NAR supports reauthorizing federal flood insurance for five years and making reforms that would strengthen the program. As it stands, the program is set to expire at the end of this month, and REALTORS®, when they’re in Washington next week for the Rally to Protect the American Dream and the NAR Midyear Legislative Meetings & Trade Expo, will make the program reauthorization an advocacy priority. Members will be meeting with members of Congress from their state in their annual Hill visits.
Many lawmakers on a bipartisan basis support reauthorization, but extending the program is always a challenge. Congress in the past several years has reauthorized the program in short-term increments, and a couple of times it allowed the program to lapse for a short period. Those lapses, as short as they were, have been very hard on the market. Thousands of transactions couldn’t close—and that’s what President Veissi means when he talks about giving lenders another reason to say no.
And the problem isn’t a coastal issue. As President Veissi says in his testimony, which you can see in the the 3-minute video above, flood plains are everywhere, so the absence of insurance is a nationwide problem.
Closing costs in New York state are high, so you can imagine that coming up with the money for first-time buyers is a challenge. That was a problem the New York State Association of REALTORS® identified several years ago, and it took steps to do something about it by creating the NYSAR Foundation and its first-time homebuyer program.
Now, several years later, the NYSAR Foundation has helped more than 70 households become first-time buyers, and that has increased business for the association’s members.
What’s more, the Foundation did it in a way that maximizes the use of every dollar in assistance that it receives. As NYSAR CEO Duncan MacKenzie says, “For every dollar that we get in, we put a dollar back out, and we think that’s a proper way to do it.”
If you’re interested in creating a first-time buyer program in your local area or state, I’m sure the folks at the NYSAR Foundation would be happy to share with you how their program works. You can also get some ideas in the 3-minute video above. There, Foundation leaders talk about why they started the Foundation, some of the program’s operational details, and how REALTORS® in the state like the program. (They like it a lot.)
NAR’s a program partner, too. It contributed $130,000 in funds that NYSAR is using to provide some of the closing cost help. The funds came through NAR’s Ira Gribin Workforce Housing Grants program. Those grants have ended, but NAR still offers funding through its Housing Opportunity Program, which is a competitive grant program that NAR makes available every year.
You can learn more about applying for that money by sending an e-mail to Wendy Penn of NAR at wpenn@realtors.org. It’s a program for state or local associations, so the application has to come from your association.
Other associations have used NAR HOP grants in their programs. Here are videos on how the Fredericksburg, Va., Springfield, Mass., and Charlotte, N.C., associations of REALTORS® structured their programs:
Charlotte, N.C.
Springfield, Mass.
Fredericksburg, Va.
You’ve been hearing a lot about NAR’s Home Ownership Matters campaign over the last year and a half. It’s all about letting lawmakers and policymakers in Washington know that home ownership is a bedrock value of our country and any reforms to stop problems like the toxic loan practices that upended the market four years ago actually fix the problem and don’t hurt home ownership.
But did you know there’s also a business-boosting side to the Home Ownership Matters campaign?
For the last 18 months, NAR has been commissioning research and compiling articles, studies, and other material that show just how valuable home ownership is to our country, both financially and in terms of household, neighborhood, community, and national stability.
All these resources add up to a library of information that you can use to be the go-to person for your customers and clients who are concerned about what impact Washington actions will have on their home or on home ownership in general.
By sharing with households research showing just how valuable home ownership is, you’re helping them take their future into their own hands. And you can expect that to translate into an appreciation for all the information you provide and for all that you do.
The 4-minute video above with REALTOR® Magazine Online Editor Brian Summerfield will give you a sense of just how much information is available for you to share with your customers and clients.
It’s the QM rule’s turn in the spotlight, and so far a federal proposal raises concerns
If you’re applying for a loan, what determines whether or not you can repay that loan?
That’s what a federal regulator is trying to determine right now, and based on a proposed rule they’ve written, they’re thinking about setting standards that NAR and other industry groups—and consumer groups, too—think will make it hard for even creditworthy households to get a home loan.
The regulator is the new Consumer Financial Protection Bureau and the rule it’s writing is called the qualified mortgage (QM) rule. CFPB is trying to define the way banks measure a loan applicant’s ability to repay a loan: what the applicant’s monthly debt-to-income ratio is, what the monthly mortgage payment would be, what the applicant’s credit history is, and so on.
NAR and some 40 partners in a coalition sent CFPB a letter not long ago saying “ability to repay” should be defined in broad terms, otherwise lenders’ ability to make loans to all but the most creditworthy households would be constrained.
It’s like last year’s battle over the proposed QRM rule all over again.
If you remember the QRM rule, it was supposed to set its own underwriting standards, although with applicability limited to loans that are included in securities and sold to investors. If the loan met the QRM standard, lenders can sell 100 percent of the loan to investors. If the loan didn’t meet the standard, lenders can still make the loan but they have to retain 5 percent of the loan amount on their books. That means these non-QRM loans would be expensive for borrowers, adding to the cost of buying a house and blocking some households from buying.
NAR and other groups, inluding consumers groups, built such a strong case against the proposal (in part because it considered requiring a strict downpayment requirement) that regulators have shelved the rule while they weigh all the input they received.
Here we are a year later and CFPB is writing the QM rule, which is a more general ability-to-repay rule that applies to all mortgages, securitized as well as non-securitized loans, and once again regulators are weighing a narrow definition that could include overly prescriptive standards that would make it hard for lenders to make any loans except to the most creditworthy borrowers.
Will CFPB go down the same road as the Federal Reserve and other regulators that drafted the proposed QRM rule? Let’s hope not.
But there’s another concern with the QM rule, and it has to do with the legal standard that lenders will have to meet if a loan goes bad.
CFPB is weighing whether to hold lenders to what’s known as a rebuttable presumption standard of legal culpability or give them a “safe harbor” under which they can protect themselves from lawsuits of questionable merit by borrowers who default on their mortgage.
“Rebuttable presumption” and “safe harbor” are legalistic terms, but underlying them are simple concepts. If CFPB decides to use a rebuttable presumption standard, any borrower who defauts on his loan and believes the lender didn’t technically meet the ability-to-repay standard can bring an action against the lender. Even if the lender were to prevail against the action, it still has to defend itself, which is costly, time-consuming, and resource intensive. Multiply that by the number of actions taken against it and you can see that lenders might just throw up their hands and refrain from making any loans except to the safest, most creditworthy borrowers.
The safe harbor approach, which NAR and its coalition partners support, is far less likely to lead to a retreat from the market by lenders, because it saves them from having to defend against each and every defaulting borrower as long as the loans it makes follow the ability-to-repay standard. Borrowers who default can still sue but the case can be immediately dispensed with if the lender has met the safe harbor. At the same time, you can expect the loans to be relatively safe, because they would have been underwritten using the federal standard.
There’s more to these issues, and any time you try to write about legalistic issues in non-legal terms, you run the risk of over-simplifying, so you can read the proposed rule for yourself.
The bottom line has to do with what makes sense for the market. If we want lenders to make safe loans to more than just the most creditworthy borrowers, then CFPB should write a QM rule that broadly defines the ability to repay and that provides a legal safe harbor for lenders. A rule that narrowly defines the ability to repay and that gives defaulting borrowers too-easy legal standing to sue reopens last year’s QRM debate.
The 2-minute clip above is extracted from a video on the QM rule. It looks at the differences between the safe harbor and rebuttable presumption legal standard that’s of concern.
More on QM, including the full video in which the clip is taken.
The Wall Street Journal today says the housing market nationally is bottoming out, the essential first step before it can start rising again. But the Journal is a little pessimistic that the upward bounce is coming any time soon. It says the market could drag along the bottom for a while, thanks in part to the uncertainty over how banks’ “shadow inventory” will be handled over the next few years and the continuing trouble borrowers are facing getting financing.
“There are more signs than there were a year ago that housing isn’t getting any worse,” the paper says, “and that it may slowly be getting better.”
But how slowly? The Journal says prices nationally are still falling. It cites February data from CoreLogic that prices fell 2 percent from a year earlier. Recent Case-Shiller data also show prices continuing to fall. NAR data, which draws directly from MLS data, differs from these two data sets. In February it showed prices with a slight, 0.3 percent gain, and in March with a more substantial 2.5 percent gain. These figures take into account distressed sales, which comprise about a third of all existing-home sales today and have a dampening effect on prices, so price gains would be higher if these sales were taken out of the data.
Time will tell which data set is more accurate. Several months will need to go by before we can look back and see what’s actually happening today with prices, but in any case, NAR Chief Economist Lawrence Yun is optimistic about what the market will look like later this year.
First, distressed homes are getting snapped up by bargain hunters, both investors and owner -occupants. That softens the impact that banks’ shadow inventory will have on markets in the months ahead as more properties are released. Second, inventory levels are down to six months, which historically has been the level at which prices stabilize.
To be sure, inventories have been down to six months only for a short amount of time, so it’s too soon to say there’s a trend here. But if inventories stay down at this level for several more months, the stage could be set for better news on prices.
One point made by the Journal that is certainly the case is the continuing trouble borrowers are having getting loans. As the paper says, banks are maintaining tight credit standards in part because of their concerns that Fannie Mae and other secondary market entities will make them buy back any loans that go bad. So, their standards are ratcheted up, and that’s causing even creditworthy borrowers headaches.
It’s safe to say that, until the difficulty of getting financing eases back to a more normal level, even today’s brightening picture can’t be taken for granted, and the Journal’s concerns about a prolonged stay at the bottom could prove true.
Existing-home sales last month were down slightly but they remain at about a 4.6 million level, as they have since January, so if that level holds for the remainder of the year we could see a strong 2012, NAR Chief Economist Lawrence Yun said at a press conference in Washington today.
The relatively strong performance this first quarter stems from the improving economy, Yun said. But it also has to do with the pent-up demand that’s been building for the last several years. At some point, people doubling up or living with parents will start forming households, as they always do when the population increases, and many of these households will buy. Yun thinks we’re seeing signs of this now.
Along with the relatively high level of sales, inventories are down, which helps on prices, and that’s reflected in the numbers. The national median home price is up more than 2 percent from last year.
It’s possible larger homes are being sold (normal for this time of year), so that could account for some of the price increase. But also distressed sales as a percentage of the market are starting to decline. So, that could be having an impact on prices, too.
All in all, despite the slight dip in volume, the picture looks relatively good going into the spring buying season.
REOs and other distressed sales make up about a third of the market today on a national basis and NAR’s just-released Investment and Vacation Home Buyers Survey shows that distressed homes comprise about a quarter of the homes bought for non-primary use.
Against this backdrop, Fannie Mae about a month ago announced that agents working with households buying a Fannie Mae REO must submit the offer online through the company’s HomePath portal. It won’t accept offers any other way.
The good news is that offers can only be submitted by agents. So, households interested in making an offer on an REO property have to contact an agent and work with that person on the submission.
The other good news is that submission is quick and easy because of the all-online process. That means you fill out all the forms online, scan the supporting documents, save them as digital files, and include them in your submission.
Although the process is straight-forward, it’s inevitable that you’ll have a lot of questions. So, we’re hosting the Fannie Mae executives who are overseeing this process for a one-hour webinar on how the submission process works. They’ll walk you through the steps.
They’ll also talk about policy matters that you’ll need to know about, such as their 15-day “first-look” period, which restricts offers from investors on new REO listings. They’ll talk about financing matters, too.
It’s a free webinar and you’ll be directed to an online manual and other materials to make it as easy as possible to master working online. You can imagine that it won’t be too long into the future when many transactons will be done this way.
The webinar is Thursday, April 26, at 3 p.m., Eastern Time. Presenters are Jane Severn, director of new business initiatives for Fannie Mae, and Robin Still, senior strategic planning analyst with the company.
Go to the registration page for the free webinar. To register, you just need to provide a name and e-mail address: Go to the REGISTRATION PAGE now.
John Wolford is a broker with Long & Foster Real Estate in Springfield, Va., but on May 17 he’ll be just one real estate professional among many from different companies in his market and from around the country in front of the nation’s capitol to remind lawmakers that home ownership and commercial real estate are vital to the country.
“We’re looking forward to standing up for the American Dream, with REALTORS® from all across the country—California, Texas, Ohio, Northern Virginia, Maryland—regardless of company,” says Wolford.
Wolford is in a 3-minute video on why his association, the Northern Virginia Association of REALTORS®, is doing everything it can to make the May 17 Rally to Protect the American Dream a success.
The rally is being hosted by NAR to ensure the importance of real estate remains top of mind as lawmakers and policy makers in the years ahead look at legislation and regulations that could impact aspects of home ownership and commercial real estate.
NVAR’s chair, Pat Kline, says Congress and policy makers in Washington mustn’t do anything that would make it harder for households to build equity and stabilize their lives through home ownership. “In our country, it’s not about where you’re from but where you’re going,” she says.
“NAR has made it very simple for REALTORS® to get involved in the rally,” sys NVAR CEO Christine Todd. “They’re providing breakfast and lunch, backpacks and T-shirts, and buses for members to get to Washington. All we have to do is get members on the bus or, if they’re going to be at the 2012 NAR Midyear Legislative Meetings & Trade Expo, to make sure they register for the rally,” says Todd.
After the rally, which is in the morning, rally participants will take the subway or a bus to the NAR trade expo, where there will be activities and giveaways.
More about the Rally to Protect the American Dream.
Wall Street Journal pending sales coverage
Coverage in much of the media of NAR’s latest pending home sales index, whch was released on Monday, has focused on the improvement we’ve seen over last year.
The Wall Street Journal, for example, in its front-page “Vital Signs” info graph for today (March 27, 2012), features data from NAR’s pending home sales index and says “Americans are buying more homes this year than in 2011.”
Bloomberg Businessweek says, ”Pending sales of U.S. existing homes [are] at near two-year high.”
Focusing on the improvement over last year is positive, because month-to-month fluctuations can make it hard to see the big picture. In yesterday’s NAR release, the forward-looking indicator was actually down, although almost imperceptibly—0.5 percent—but, as the news coverage said, it was up a strong 9 percent from a year ago.
Even with the monthly dip, the index suggests markets are in an extended period of stabilization. On a national basis, sales have been at about the same level since 2009, sometimes moving up a bit and sometimes dropping back down, but always hovering in the same territory, roughly 4.2 million sales. But for the last two months they’ve been at about a 4.6 million pace, which, if that persists, would be the highest level in five years, according to Lawrence Yun, NAR’s chief economist.
Yun thinks the big-picture view is looking up after what’s been a tough several years, in large part because of what’s happening in the broader economy. Rental rates are rising, making home ownership more attractive, jobs are heading up, and the stock market has been strong, too. What’s more, the improved sales picture is broad-based. Unlike last year, when sales improved for a while because of strong activity in a few markets, like Las Vegas, this year improvement is happening in all parts of the country: Pittsburgh, Syracuse, Dallas, Kansas City, Minneapolis, Seattle, and so on.
Maybe most important of all, the improving economy might help unleash the pent-up housing demand we’ve been waiting for. Yun has been talking about this for several years now. The population has continued to grow (it’s around 310 million now, maybe a little more), but home sales have been stuck at levels we last saw 10 years ago, despite the country having more people.
Its not just that people are renting rather than buying; it’s that young people haven’t been moving out and forming new households or they’re moving out and doubling up with friends. Yun thinks people might have the confidence now to start forming households, setting the stage for improved housing conditions in the years ahead.
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