Middle-Market Is Next Home Segment to Improve

By Robert Freedman, Senior Editor, REALTOR® Magazine

Executives from some of the largest brokerages in the country expect to see their sales grow 6-8 percent in 2010 and home prices to start heading up about 3 percent, REALTORS® heard in a state of the real estate industry discussion Saturday at the 2009 NAR Conference & Expo.

John L. Scott Real Estate chairman and CEO J. Lennox Scott said expansion of the tax credit to include repeat buyers will help boost middle-market sales next year, although mortgage financing above the $417,000 non-jumbo conforming loan limit will remain a challenge. “The repeat tax credit will at least start a conversation about buying” among existing home owners, Scott said. Read more

Stevens Strongly Defends FHA’s Financials

By Brian Summerfield, Online Editor, REALTOR® Magazine

In an address to hundreds of REALTORS® at the 2009 NAR Conference & Expo Saturday afternoon, FHA Commissioner David Stevens offered a fervent defense of the organization’s financials. He specifically addressed the negative press surrounding the FHA’s recent audit, which showed part of its capital reserves below congressionally mandated levels.

Stevens distinguished the FHA’s capital reserves for unexpected losses from its regular reserve fund, which remains above 2 percent. Together, the two funds equal almost 4 percent in reserves. “We’ve come through the 100-year flood,” he said. “Despite the crisis, FHA is still standing with $31 billion in capital, $3.5 billion more than it had a year ago.” Read more

Sun, Surf, and Success in San Diego

By Brian Summerfield, Online Editor, REALTOR® Magazine

The NATIONAL ASSOCIATION OF REALTORS® kicks off its 2009 Conference & Expo this week in San Diego. It’s the first time it’s ever been held here, and attendees who have never been to “America’s Finest City” before are in for a real treat. San Diego offers a very agreeable climate (at least to someone who’s coming from Chicago in November), and the Convention Center and nearby hotels are surrounded by interesting things to see and do.

This year’s Conference & Expo promises to be edifying and fun. There are approximately 400 exhibitors this year, and the aisles will be packed with real estate pros checking out the latest in everything from mobile real estate apps to transactional tools to selling techniques. Also, the workshops and sessions will provide insights on just about every topic related to real estate, from social media to research resources. Attendees can get info on a broad range of subjects, or go through more concentrated tracks based on their background; these include young professionals, broker/owners, and commercial practitioners. Read more

FHA Eases Concentration, Other Condo Rules

By Robert Freedman, Senior Editor, REALTOR® Magazine

In an effort to give condo lending a boost, FHA yesterday released a mortgagee letter (2009-46 A) that lets lenders make loans to condo buyers even if it means 100 percent of the project units would have FHA financing.

That’s a level of market exposure far above what FHA is allowing in its baseline rules (which you’ll find in another mortgagee letter: 2009-46 B), which limit FHA concentration to no more than 30 percent of units.

FHA is also easing its 50-percent owner-occupancy requirement—long an industry concern—by allowing lenders to exclude foreclosed properties in their calculation. That could go a long way in helping buyers in the hardest-hit areas tap FHA financing because it means none of a project’s distressed units count against the owner-occupancy limit.

The agency’s also allowing lenders to make spot loan approvals until February 1, 2010. If you’re not familiar with spot approval, it’s an authority given to lenders to finance one unit in a project that hasn’t yet been approved by FHA for financing.

These and a few other changes that reflect a realistic assessment of today’s market conditions take effect Dec. 7 and they last, with the exception of the spot approvals, until the end of 2010.

If you’re going to San Diego for the 2009 REALTORS® Conference & Expo this week, make it a point to hear FHA Commissioner David Stevens in the An Hour with the FHA Commissioner session. Read more

Stevens: Facts Getting Lost in FHA Safety Debate

By Robert Freedman, Senior Editor, REALTOR® Magazine

“Nobody has asked to come in and look at our balance sheet, to go through our finances, which I’ve offered to everybody.”—FHA Commissioner David Stevens

News reports raising concerns that FHA might be the next major financial institution requiring a government infusion are based on misinformed comparisons with what happened in the subprime market, FHA Commissioner David Stevens said in an exclusive interview with REALTOR® Magazine this week.

At their peak, subprime lenders commanded 40 percent of the residential mortgage market by making low-downpayment, no-document, interest-only, and other types of exotic loans to high-risk borrowers, investors, and speculators, a market that FHA sat out entirely, says Stevens.

Today, it’s FHA that commands 40 percent of the market, but that’s where the comparison ends. The agency makes 30-year, fixed-rate, fully documented loans only for households buying their primary residence. For each loan, the agency maintains capital reserves for the full 30 years of the loan rather than for the 1-2 years required of banks.

Today, the agency has more than $30 billion in reserves, including a fully funded loan-loss reserve. All the talk in the media about reserves dipping below a 2-percent required threshold is about a secondary account that’s above and beyond the agency’s primary reserve. Those two accounts together represent more than 4 percent of assets, he says.

An actuarial audit of FHA finances due out in a few weeks from a non-governmental auditor is expected to find that FHA has sufficient capital to cover all forecasted losses, even assuming further delines in home prices, says Stevens.

“What concerns me, and I think should concern all REALTORS®, is . . . non-fact-based [criticism] from people who jump to conclusions without looking at data [and] create an environment where we’ll be forced to make corrections where they are not required and can hurt this housing recovery.”

Stevens sat down with the magazine for a 30-minute interview that covered the agency’s new appraisal policy and an upcoming mortgagee letter that’s expected to make condo financing more attractive as well as the agency’s credit health. He also talked about the improvements to the agency’s processing that makes it comparable to conventional lenders in terms of processing speed and paperwork requirements.

Listen to snippets of the conversation here: Read more

An Under-the-Radar Win for Common Sense

By Robert Freedman, Senior Editor, REALTOR® Magazine

It’s a small thing, but it’s impact could have been big. Some new federal lending rules take effect tomorrow (under HOEPA—the Home Ownership and Equity Protection Act) and among them is a restriction on prepayment penalties, something anyone who’s taken out a mortgage would certainly appreciate. No one likes to pay a prepayment penalty, and certainly not when they’re abusive.

But lenders were concerned that the rule, which imposes the prepayment restriction on higher-priced loans (those with an interest rate 1.5 percent above prime), would snag higher-priced FHA loans. FHA requires borrowers, when they pay off their loan, to pay the entire month’s interest, no matter when during the month the pay-off occurs.

Depending on how you look at it, that extra interest payment has the character of a prepayment penalty, and indeed, NAR has been trying to get FHA to change that policy. Read more

The Week in Quotes

By Brian Summerfield, Online Editor, REALTOR® Magazine

With the nation’s focus on rising unemployment, an uncertain economic recovery, and health care reform, here are some of the more salient quotes from leading figures this week:

“It is hard to escape the conclusion that the Fed may need to maintain fairly low interest rates over a period of many years … If you want to bring down leverage, you should keep monetary policy sufficiently accommodative to forestall a collapse in spending and a deflationary spiral.”

- Goldman Sachs economists Peter Berezin and Alex Kelston, commenting in a report released this week Read more

Can You Afford to Say No to FHA Borrowers?

By Robert Freedman, Senior Editor, REALTOR® magazine

Hopefully you don’t consider it a mark against buyers if they want to use FHA financing. It’s true it typically takes longer to process FHA-backed financing than it does conventional loan applications, but with the challenging credit environment, for a big chunk of your potential clientele the only financing available to them is FHA. What’s more, these days it’s taking longer to get conventional financing applications processed, so the time gap between the two has narrowed considerably.

Yet here in NAR we continue to hear that sellers—and some sales associates—are discouraging FHA borrowers from making offers on homes in the outdated belief that FHA is significantly slower and more paper-intensive than conventional financing.

Not true, says NAR Senior Policy Analyst Megan Booth. While it’s the case FHA still requires borrowers to jump through some hoops that don’t apply to conventional borrowers, the agency has undergone a sea-change in the last several years in the way it does business. Read more

Top 5 Daily News Stories Last Week

Here are the top five items from the Daily News last week: Read more

A Proposed Reboot for Fannie and Freddie

By Brian Summerfield, Online Editor, REALTOR® Magazine

A proposal to take Freddie Mac and Fannie Mae’s bad assets off the books and restructure the two organizations is scheduled for discussion at the White House’s National Economic Council today. A central part of the plan is the creation of a permanent, government-supported “bad bank” that would always be there to back up Fannie and Freddie by absorbing any toxic debts. (This idea originated with James Lockhart III, the chief regulator of the two companies and head of the Federal Housing Finance Agency, who recently announced that he’ll be stepping down from that role at the end of this month.)

Proponents of the move say this would shore up the organizations and get them funding mortgage loans again, which they haven’t been doing much of since their near-collapse in the summer of 2008. (The Federal Housing Authority has stepped up to fill some of the vacuum left by this breakdown in the mortgage lending system.) By reducing both bad assets and risk, Fannie and Freddie would be in a position to resume their roles as the prime movers of the mortgage market, which would in turn boost the housing sector and, ostensibly, the entire economy.

However, there are potential problems with the plan. Read more

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