Entries Tagged 'Real Estate' ↓

Falling home prices around the country have cut the amounts seniors can receive on reverse mortgages from the Federal Housing Administration. The popular FHA program is running a $798 million deficit this fiscal year, forcing the agency to cutback new reverse mortgages.

Analysts say the move amount to a cutback of 10 percent on all new FHA reverse mortgages. Those who have existing FHA reverse loans are not impacted by the change.

The National Reverse Mortgage Lenders Association estimates the policy could prevent more than 1 in 5 applicants from paying down their existing mortgage note with the funds from a new reverse mortgage. The Association says this could lead some seniors to delinquency and foreclosure.

Under the new FHA policy, a $100,000 FHA reverse mortgage would be reduced by $10,000 to $90,000 in proceeds. This reduction would leave many applicants without the money to pay off the balance of their note.

In a reverse mortgage, the bank providers homeowners 62 and older with a lump-sum payment, monthly payments, or a credit line the borrower can draw upon. The reverse mortgage is secured by the equity in the home and is only payable when the owners sell the house.

Coldwell Banker released its annual Home Price Comparison Index (HPCI) a couple of weeks ago and while the most expensive areas are no surprise, the real news was how many markets are now affordable.

In total, there are 84 U.S. markets in which the sample home price averages under $200,000. The monthly mortgage cost for homes in this price range could average less than $600, and down payments could amount to less than $4,000.

The survey found a price gap of more than $2 million between the most expensive and most affordable U.S. housing markets. In the annual comparison of similar 2,200-square foot homes in 310 U.S. housing markets, La Jolla, Calif. led the list as the most expensive real estate market in the country with an average home price of $2,125,000. Grayling, Mich., also known as the “canoe capital of the world,” ranked as the most affordable market in America, where a similarly sized home costs $112,675.

As in past years, California dominated the most expensive housing market list. Joining La Jolla in the top 10 were the California markets of Beverly Hills, Palo Alto, Santa Monica, San Francisco, Newport Beach, Palos Verdes, and San Mateo. Boston and Greenwich, CT were the only two non-California locations in the top 10.

In contrast, the midwest dominated the list of most affordable markets. Akron, OH, Canton, OH, Detroit, and Eau Claire, Wis. all placed in the top 10 cheapest housing markets.

The most expensive market outside the United States is Singapore, where an HPCI subject home averages $1.9 million U.S. dollars, ten percent lower than La Jolla. Coldwell Banker Real Estate compared a total of 57 markets in 29 countries outside of the United States, with those international home prices averaging $487,844 in U.S. dollars.

For the first time in four months rates on 30-year mortgages dipped below 5 percent. According to mortgage company Freddie Mac, the average for 30-year fixed rate loans was 4.94%, down from 5.05% last week.

These low home loan rates, combined with the federal tax credit for first time homebuyers drove up the number of signed home sales contracts for the seventh straight month, the National Association of Realtors reported. The association said that its index of sales agreements rose 6.4 percent from July to 103.8, beating forecasts. The index was 12 percent higher than a year ago, matching similar reporting on home sales from the Case-Shiller home sales index.

The decline in mortgage rates is significant in that the economy appears to be picking up steam, leading many analysts to predict interest rates would start to rise. This clearly hasn’t happened yet, as last week’s rates were the lowest since May when it was 4.91 percent. Mortgage rates hit their record lowest point of 4.78 percent in the spring.

In yet another sign that the national housing market is stabilizing, the latest Case-Shiller/S&P Home Price Index reports that rose 1.6 percent from June to July across 20 major metropolitan areas collectively.

This latest bump comes on the heels of a a 1.4 percent increase for the previous month and is the third straight month that prices have risen. Despite the recent good news, prices are still down over 13% year-over-year for the composite index. Prices are lower in every one of the 20 cities surveyed compared with a year ago.

Analysts warn that a range of factors, including higher unemployment, a new wave of foreclosures, and the looming expiration of the federal tax credit for new home buyers on November 30th could put the brakes on the budding housing recovery.

Here is a chart showing the Case-Shiller Index over the last year, thanks to the San Francisco Chronicle:

The metro areas that saw the biggest price increases over the last month include Minneapolis, San Francisco, Chicago, and Atlanta. Seattle and Las Vegas were the only two cities that saw a decline in prices from June to July.

According to a study released last week, state laws requiring mortgage companies to talk to homeowners before starting the foreclosure process are not working. The National Consumer Law Center, which looked at loan modification laws in 14 states, said the measures have failed to protect homeowners because they lack any sanctions for banks that don’t comply.

“There is as yet no data to confirm that foreclosure-mediation programs anywhere have led to a substantial number of affordable and sustainable loan modification programs,” the report stated. The laws on the books have the potential to help borrowers, but they lack the same bank accountability as the voluntary federal program.

For example, in California, the state law says mortgager providers cannot begin foreclosure until 30 days after they have contacted the delinquent homeowner to explore options for the borrower to avoid foreclosure. The law went into effect in September 2008 and had the immediate effect of slowing down the foreclosure process. However, the number of foreclosures in California has now returned to its previous levels.

To improve the state programs, the report suggested several changes including requiring banks to disclose to homeowners the cost of foreclosure versus the cost of loan modification; imposing sanctions on lenders that do not negotiate in good faith; and requiring proof of who actually owns the loan. The report recommends that banks certify compliance with a mediator o court before being allowed to proceed on foreclosure.