Affordability

Affordability remains at record levels, supported by the lowest mortgage rates in decades, low home prices, as well as the first-time buyer tax credit. So far this year, the home price-to-income ratio has fallen well below the historical average of 25 percent. The ratio now stands at 15 percent.

 Sources: National Association of Realtors, Freddie Mac

Existing Home Sales

After a rising surge for three straight months, existing home sales slowed in December after first-time buyers rushed to meet the original November tax credit deadline and evidenced by first timers accounting for 51% of sales in November compared to 43% in December. “It’s significant that home sales remain above year-ago levels, but the market is going through a period of swings driven by the tax credit,” said Lawrence Yun, NAR chief economist. December sales of 5.45 million remain 15 percent above the 4.74 million-unit level last year.

Median Home Price

Existing-home price was $178,300 in December, 1.5 percent higher than December 2008 and 8.2 percent above its low in January 2009. It was the first year-over-year gain in median price since August 2007, attributable to an increase in the number of mid- to upper-priced homes in the sales.

Inventory

The supply of homes continued to shrink, falling 6.6 percent to 3.29 million, representing a 7.2-month supply at the current sales pace. Compared to a year ago, there are now 11 percent fewer homes on the market. This is the lowest level of competing homes on the market since March 2006.

In early January alone, there were several high profile convictions:

• Six people in Boston were arraigned in a $2 million mortgage fraud scheme.
• A Naples, Fla. man was sentenced to seven years in prison and ordered to pay more than $11 million in restitution for setting up straw deals to obtain inflated mortgages.
• A Colorado man was sentenced to 31 years in prison after a mortgage fraud scheme.
• Two North Carolina men were sentenced for their part in a $6 million mortgage fraud scam.
• Two New Jersey men were convicted in a multimillion-dollar mortgage fraud and property flipping scheme.

Those are just a few of the many early January mortgage fraud headlines from coast to coast. Indeed, prosecution of mortgage fraud is on the rise as the U.S. Justice Department makes the issue a priority. U.S. Attorney A. Brian Albritton has publicly declared that “Mortgage fraud will not be tolerated.”

The Cost of Mortgage Fraud

When you examine the cost of mortgage fraud, it’s easy to see why the federal government is cracking down on the crime. Again, many believe mortgage fraud added to the financial crisis in the subprime mortgage industry and the fall of banks. Consider the latest statistics compiled by the Mortgage Asset Research Institute on the pervasiveness of mortgage fraud:

• As of March 2008, the Federal Bureau of Investigation (FBI) was investigating more than 1,200 mortgage fraud cases – that’s a 50 percent increase from 2006.
• The FBI also reports that about half of the mortgage fraud cases it is investigating report losses exceeding $1 million and some exceed $10 million.
• According to the Financial Crimes Enforcement Network, the number of suspicious activity reports (SARs) submitted relating to mortgage loan fraud increased 1,411 percent from 1996 to 2005.
• According to the TowerGroup, losses from mortgage fraud were about $2.5 billion in 2008 – and the firm expects comparable losses to continue for the next few years.

Although there is a level of fraud that exists where home buyers and/or their mortgage brokers falsify documents in order to get a loan approval, the FBI estimates fraud for profit accounts for up to 80 percent of the problem. That leaves 20 percent – or more – of the issue in the hands of consumers and mortgage brokers.

Keep Client Safe with the SAFE Act

The federal government has put measures in place, such as the Secure and Fair Enforcement of Mortgage Licensing, or SAFE Act, to discourage mortgage brokers from these practices. A key component of The Housing and Economic Recovery Act of 2008, the SAFE Act aims to better protect consumers and curb fraud by encouraging states to establish minimum standards for licensing and registration of state-licensed mortgage loan originators and has also established a nationwide mortgage licensing system and registry for the residential mortgage industry to increase the accountability and tracking of loan originators. If a broker is convicted, that conviction would be listed in the registry.

The bad news is the registry is not yet publicly available. The good news is systems are actively being put in place to protect homebuyers from dishonest mortgage brokers so the housing market will be less prone to negative impacts from mortgage fraud in the future.

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1)      Increase the down payment required from 3.5% to 5%

2)      Raise the upfront premium from 1.75% to as much as 3%

3)      Eliminate the ability to roll in to loan that up front premium

4)      Increase monthly MIP from .55%

5)      Reduce seller concessions from 6% to 3%

6)      Raise minimum FICO score

7)      Possible LTV maximums by FICO score

8)      Increase accountability of FHA Lenders for fraud

Timing:  “We expect these changes to be announced soon and could be implemented within a couple months.  None of these changes requires congressional approval and can be made administratively and therefore can be implemented quickly.”

This is of course going to make it tougher and more expensive for borrowers to obtain FHA loans and therefore reduce the number of eligible borrowers. Another reason to get out and start looking for your next home NOW!! And those considering selling, DON’T WAIT for spring…get your home on the market now, before these changes go into effect!!

Only 28 days until our team travels to New Orleans for the annual Keller
Williams Family Renuion. Our company provides over 200 break out
training classes, updates on the state of the real estate market, and 
national speakers. We use this time to learn more about how we can
improve our service to our clients, market our properties with the newest
technologies and continue to be one of the top real estate teams in the
Greater Cleveland Real Estate Market! Keller Williams Realty and The
Stewart Team “Brings You Home”  Keller Williams Realty joined the ranks
of the top franchises in the world recently, when the company was ranked
as the No. 1 real estate franchise on the 31st Annual Franchise 500 list by
Entrepreneur magazine. During the same week, the company was also voted
the Most Recognizable Brand of Real Estate Franchises for 2009 in an
industry-wide survey for the Swanepoel TRENDS Report. According to the J.D.
Power and Associates 2009 Home Buyer/Seller  StudySM, Keller Williams
Realty, Inc., the third largest real estate company in North America, received
the highest overall satisfaction ratings from home buyers among the largest
full-service real estate firms for the second year in a row. The company also
ranked second-highest among home sellers in the study. We are so proud to
be associated with this great company. To learn more about KW visit,
www.TheKWDifference.com .

• 

  Tax Credits for Replacing Windows, Doors, and Skylights

  If money seems to be escaping through drafty windows, doors, and skylights, this federal tax credit might make energy-efficient replacements more affordable. Read

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This is really timely information for sellers that are thinking about waiting until spring to either list their homes for the first time or get back on the market. We are already seeing much more sales activity starting in the first 10 days of January. The new tax credit $6,500 available for 2nd time home buyers is going to play a big part, since this was not available in 2009. Our entire team has been showing homes almost everyday over the last 7 days with pre-approved buyers that are looking because of the tax credit and low interest rates. For more information please give The Stewart Team a call today to discuss the benefits of getting your  home on the market NOW! Don’t wait until the snow melts, the tax credits end on April 30th 2010! First time buyers still have up to a max of $8,000 available for their tax credit….. 

You can also visit us at:

www.StewartTeamHomes.com

This news is another great reason for buyers to start searching now for their home! Plus the April 30th deadline for the buyer’s tax credit. Buyers must be under contract by this date to take advantage of the tax credits! First timers up to $8000 credit, and repeat buyers $6500. Visit the site listed below for FAQ’s… 

http://www.federalhousingtaxcredit.com/

Interest rates are likely to rise to at least 6% by the end of 2010, predicted Amy Crews Cutts, deputy chief economist at Freddie Mac. The end of the Federal Reserve program that buys mortgage-backed securities will drive rates higher because private buyers will demand more return than the Fed…

Extraordinary resources have been put into keeping the rates down and supporting the mortgage markets and it’s hard to imagine that the rates can go much lower than they are, “Crews Cutts said. “Anything we get at or below 5% is a gift at this point.”

Contact The Stewart Team today so we can help you get on track to take advantage of all that is available now!

Source: Washington Post