Get help - before you fall behind on your FHA mortgage

Read from CNN:

http://money.cnn.com/2010/01/22/real_estate/easier_FHA_help/index.htm

New FHA Guidelines

New rules for FHA borrowers The Federal Housing Administration (FHA) today outlined future changes to the FHA home loan program. The changes first were proposed last month by Secretary of Housing and Urban Development (HUD) Shaun Donovan. Rising defaults on FHA loans have led to the FHA’s cash reserves falling below federally mandated levels. FHA officials hope that policy changes will ensure borrowers have a stronger equity position and are less likely to default. Policy changes include: Raising the up-front mortgage insurance premium: The premium will rise to 2.25 percent from its current 1.75 percent. HUD is expected to release a Mortgagee Letter on Jan. 21 making the premium increase effective in the spring. Raising the minimum credit score requirements: New borrowers will be required to have a minimum FICO score of 580 to qualify for the FHA’s 3.5 percent down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10 percent. FHA expects this to take effect in early summer after it goes through the normal regulatory process. Reduce allowable seller concessions: The agency is lowering the maximum permissible level to 3 percent from its current 6 percent limit. FHA expects this to take effect in early summer after it goes through the normal regulatory process. .

More Information on $6,500 Tax Credit for Homebuyers

From Clark Howard:

IRS releases rules on $6,500 tax credit for repeat homebuyers

The IRS has released new information for existing homeowners who bought a new home and wish to claim the $6,500 tax credit. The relevant form you'll need to file is Form 5405. (Editor's note: This is a pdf file.)

Be aware that you must show proof you owned and occupied your priorhome for five consecutive years. In addition, if you claim the credit and flip the new house, the IRS will retroactively come after you for the $6,500. You must stay in the new home a minimum of three years, during which it must be owner-occupied as your primary residence.

The clarification of the rules surrounding this credit may provide a temporary booster shot by creating another incentive for people to buy -- just as the $8,000 first-time homebuyer credit did.

All of this begs the question of when the housing market is going to recover. The new Case-Shiller Index shows the bottom is upon us in most markets across the country. But when do we get back to where we were when home values were at their peak two or three years ago? The latest guess is 2022, according to a Los Angeles Times analysis.

That's 12 years from now. Of course, no one knows what the future holds. But Clark has said that he expects our nation could spend seven to 12 years working our way out of the funk, so that dovetails very nicely with this new info.

This does not mean seven to 12 years of daily doom and gloom. Rather, we'll have a continuing drag effect on our economy with bumps in the road -- such as unemployment and budget deficits -- for up to a dozen years.

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Going to sell your house? Don't wait for 'Spring' in February

Read the article in the LA Times:

http://articles.latimes.com/2010/jan/10/business/la-fi-umberger10-2010jan10

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What’s ahead for home prices?

From the California Association of Realtors:

California remains ahead of the nation in market recovery with many first-time home buyers entering the market due to affordable home prices, low mortgage rates, and first-time home buyer tax credits from the state and federal governments. However, credit still is tight and unemployment remains high, which could hinder a full market recovery until 2011.

MAKING SENSE OF THE STORY FOR CONSUMERS

• Home sales in California hit bottom more than two years, and the median home price of an existing, single-family home reached its trough in February, according to data collected by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). In November, the state’s median home price rose in year-to-year comparisons for the first time since August 2007.
  
  
• C.A.R.’s closely watched "2010 California Housing Market Forecast,” projects that the median home price in California will rise 3.3 percent to $280,000 in 2010 compared with a projected median of $271,000 in 2009.
  
  
• Some economists are forecasting another surge of foreclosures in 2010. However, C.A.R.’s economists expect that foreclosures will remain flat this year compared with 2009. In 2008, many lenders flooded the market with foreclosures, and as a result, the state’s median price declined by historic levels. By comparison, in 2009, lenders listed properties for sale at a more measured pace, which helped moderate another home price decline.
  
  
• Government efforts to maintain a low interest rate environment have stabilized the market. However, a mortgage analyst at a financial publishing company predicts that rates likely will rise to 5.5 percent by mid-2010 and close the year at 5.75 percent to 6 percent.

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Loan Modifications

Most successful mortgage modifications reduce principal

A new study found that borrowers who receive loan modifications that reduce loan balances, and not simply interest rates, are less likely to redefault on the loan, according to the Federal Reserve Bank of New York.

Principal reductions are more successful at avoiding redefaults because they reduce negative equity and provide the borrowers with greater incentive to remain current on the loan, according to the study. The study also found that borrowers who owe 15 percent or more than their homes’ value have a 51 percent higher risk of redefaulting in any given month.

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Possible Expansion Of Homebuyer Tax Credit

Governor proposes extension, expansion of home buyer tax credits

During his State of the State address, Governor Schwarzenegger today announced his 2010 proposals for California. Included in the proposals is a recommendation to set aside $200 million for a new round of $10,000 state tax credits for first-time home buyers. The proposal expands upon the initial $10,000 state tax credit by including both new and existing homes. Last year’s tax credit applied only to new homes.

The tax credit could be combined with the recently extended and expanded federal tax credit for home buyers.

Click for more info:

http://gov.ca.gov/press-release/14124/

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Watching The Numbers

Watching the number of homes both for sale and in escrow in East Long Beach gives us a barometer on what is happening in our local real estate market. Obviously, a rising number of homes in escrow is a good sign of things. On the other hand, a rising number of homes currently for sale can have a depressing result on prices. We will be constantly watching these numbers and posting them here. As of today the numbers stand at:

Date	Homes On Market	Homes In Escrow
Jan 02	77	72
Nov 7	78	78
Oct 21	66	90
Oct 4	73	87
Sept 21	70	86
Sept 03	69	97
Aug 13	76	80
July 14	107	93
July 1	69	98
June 13	77	105
June 8	69	106
May 30	66	102
May 18	59	102
May 10	78	88

Please add your comments and questions below...

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Fast Facts

Fast Facts :
Calif. median home price - October 09: $297,500 (Source: C.A.R.)

Calif. highest median home price by C.A.R. region October 09: Santa Barbara So. Coast $970,000 (Source: C.A.R.)

Calif. lowest median home price by C.A.R. region October 09: High Desert $118,580 (Source: C.A.R.)

Calif. First-time Buyer Affordability Index - Third Quarter 2009: 64 percent (Source: C.A.R.)

Mortgage rates - week ending 12/24/09 30-yr. fixed: 5.05 Fees/points: 0.7% 15-yr. fixed: 4.45% Fees/points: 0.6% 1-yr. adjustable: 4.38% Fees/points: 0.6% (Source: Freddie Mac)