Tuesday, August 26, 2008

Real Estate Outlook: Prices Stabilizing

by Kenneth R. Harney

The economy continues to send mixed messages -- some encouraging for real estate, some not -- but this week the positive are edging out the negatives.

Take housing prices for example. The research company with the largest database of ongoing real estate transactions - First American CoreLogic, which tracks property values in thousands of Zip codes and neighborhoods - reports that nominal price drops have "stabilized" in 883 core-based statistical areas, showing no declines in the past two months.

Why's that important? Because flattening out is what we need before we can see a cyclical turnaround -- in other words, where even in the hardest hit local markets in California, Florida, Arizona and Nevada, prices have hit bottom.

They're not likely to drop much further, and in some parts of California are now at such bargain levels that large investors are prospecting for entire packages of houses -- ten or more in some cases -- to buy in bulk and rent out.

Gary Crabtree, an appraiser in Bakersfield, California, told Realty Times that he knows of one investor who has a standing order for 20 houses that fit specific price and locational characteristics that he wants to purchase.

The National Association of Realtors sees similar bottoming out -- even the first signs of turnaround -- in a number of key markets in the U.S. In its latest quarterly report, home sales were up year-to-year in 26 percent of all states and 35 percent of metropolitan statistical areas.
Biggest price jumps were in Yakima, Washington, where the median was up 8.9 percent, Binghampton, New York, up 8.7 percent, and Amarillo, Texas, up by 7.2 percent.

On the other hand, the Realtors also reported the national median sales price was down by 7.6 percent from the second quarter of 2007, and now stands at $206,500.
In other key economic developments: New housing starts fell by three percent last month - which is only logical given builders' still bulging unsold inventories.

And mortgage rates took a dip this week to an average 6.47 percent for 30 year fixed. Fifteen year rates slipped below 6 percent to 5.99 percent. New loan applications for FHA mortgages to purchase homes rose slightly, according to the Mortgage Bankers Association of America -- even while applications for conventional home purchase mortgages from Fannie Mae and Freddie Mac dropped for the week.

Friday, August 8, 2008

Summary of the “Housing and Economic Recovery Act of 2008”

A. Summary of the “Federal Housing Finance Regulatory Reform Act of 2008" This legislation strengthens and modernizes the regulation of the housing government-sponsored enterprises (GSEs) – Fannie Mae and Freddie Mac (the enterprises) and the Federal Home Loan Banks (FHLBs or Banks) – and expands the housing mission of these GSEs. In addition, it creates a new program at FHA that will help at least 400,000 families save their homes from foreclosure by providing for new FHA loans after lenders take deep discounts. I. Safety and Soundness Regulation of the Housing GSEs The “Federal Housing Finance Regulatory Reform Act of 2008" establishes a new, independent, “world class” regulator for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, the housing government-sponsored enterprises (GSEs). The legislation endows this regulator with broad new authority, equivalent to the authority of other federal financial regulators, to ensure the safe and sound operations of the GSEs, including the power to:
• establish capital standards;
• establish prudential management standards, including internal controls, audits, risk management, and management of the portfolio;
• enforce its orders through cease and desist authority, civil money penalties and the authority to remove officers and directors;
• restrict asset growth and capital distributions for undercapitalized institutions;
• put a regulated entity into receivership; and
• review and approve (subject to notice and comment) new product offerings.

II. Mission Improvement The new legislation also significantly enhances the affordable housing component of the GSEs’ mission, and expands the number of families Fannie Mae and Freddie Mac (the enterprises) can serve by raising the loan limits in high cost areas (areas with median house prices that are higher than the regular conforming limit) to 150% of the conforming loan limit. Currently, this would be $625,000.

For the enterprises, the legislation tightens targeting requirements of the affordable housing goals, and rewrites those goals to ensure that the enterprises provide liquidity to both ownership and rental housing markets for low and very-low income families. The legislation requires the enterprises to serve a variety of underserved markets, such as rural areas, manufactured housing and the preservation market. The legislation improves reporting requirements for affordable housing activities, including the expansion of the public use data base, and strengthens the new regulator’s ability to enforce compliance with the housing goals. Finally, the legislation creates a new Housing Trust Fund and a Capital Magnet Fund, financed by annual contributions from the enterprises, which will used for the construction of affordable rental housing.
For the Federal Home Loan Banks (FHLBs), the legislation requires new affordable housing goals similar to those that apply to the enterprises for FHLB mortgage purchase programs. The legislation also requires the FHLBs to create a public use data base for such programs. Treasury-certified Community Development Financial Institutions (CDFIs) would become eligible to join FHLBs. Finally, community financial institution members of the FHLBs may use FHLB advances for community development purposes. B. Summary of the “HOPE for Homeowners Act of 2008" The “HOPE for Homeowners Act of 2008" creates a new, temporary, voluntary program within FHA to back FHA-insured mortgages to distressed borrowers. The new mortgages offered by FHA-approved lenders will refinance distressed loans at a significant discount for owner-occupants at risk of losing their homes to foreclosure. In exchange, homeowners will share future appreciation with FHA.
The program is built on five principles:
Long-term affordability. The program is built on the idea, expressed by Federal Reserve Chairman Bernanke, that creating new equity for troubled homeowners is likely to be a more effective way to avoid foreclosures. New loans will be based on a family’s ability to repay the loan, ensuring affordability and sustainable homeownership.
No investor or lender bailout. Investors and/or lenders will have to take significant losses in order to benefit from the proceeds of the loans refinanced with government insurance. However, these losses would be less than the losses associated with foreclosure.
No windfall for borrowers. Borrowers will share their new equity and future appreciation equally with FHA. Borrowers will pay for the FHA insurance.
Voluntary participation. This will be a voluntary program. No lenders, servicers, or investors will be compelled to participate.
Restore confidence, liquidity, and transparency. Credit markets are fearful and frozen in part because banks and other financial institutions do not know what their subprime mortgages and related securities are worth. The uncertainty is forcing lenders to hoard capital and stop the lending necessary for economic growth. This program will help restore confidence and get markets flowing again.
Program Oversight. The new program will be overseen by a Board made up of the Secretary of HUD, the Secretary of the Treasury, the Chairman of the Federal Reserve Board, and the Chairman of the Federal Deposit Insurance Corporation (FDIC). The Board will have the authority to develop standards within the framework of the legislation. Eligible Borrowers. Only owner-occupants who are unable to afford their mortgage payments are eligible for the program. No investors or investor properties will qualify. Homeowners must certify, under penalty of law, that they have not intentionally defaulted on their loan to qualify for the program and must have a mortgage debt to income ratio greater than 31 percent as of March 1, 2008 Lenders must document and verify borrowers’ income with the IRS.
New Loan Amount. The size of the new FHA-insured loan will be lesser of the amount the borrower can afford to repay, as determined by the current affordability requirements of FHA; or, 90% of the current value of the home. Loans must be 30-year, fixed rate loans.
Equity & Appreciation Sharing. In order to avoid a windfall to the borrower created by the new 90% loan-to-value FHA-insured mortgage, the borrower must share the newly created equity and future appreciation equally with FHA. This obligation will continue until the borrower sells the home or refinances the FHA-insured mortgage. Moreover, the homeowner’s access to the newly created equity will be phased in over 5 years. Eligible Mortgages. In order to protect against adverse selection, the program prohibits the Secretary from paying an insurance claim whenever the representations and warranties required to be made by lenders are violated, or in cases in which a borrower has an early payment default and misses the first payment. The Act provides the Board the authority to establish other protections against adverse selection, such as requiring “seasoning” for certain higher risk loans before they can be insured under the program. Appraisers of property insured by FHA must be certified by the state where the property is located, or by a nationally recognized professional appraisal organization, and have “demonstrated verifiable education” in FHA appraisal requirements. Existing Subordinate Liens. Before participating in this program, all subordinate liens must be extinguished. This will have to be done through negotiation with the first lien holder. Qualified Safe Harbor. The legislation provides servicers with an incentive to participate in the program by offering a safe harbor against legal liability. Program Size. The program is authorized to insure up to $300 billion in mortgages and is expected to serve approximately 400,000 homeowners. Program Sunset. The program will begin October 1, 2008 and sunset on September 30, 2011. CBO say the program will net nearly $250 million for taxpayers. The program is paid for by using part of the Affordable Housing Trust Fund; the GSE bill provides a further $2 billion cushion for the government by establishing a reserve fund at Treasury over ten years. If the program costs less than projected, the unused funds are returned to the Affordable Housing Trust Fund. If the program more than pays for itself (as was the case during the Roosevelt Administration), any excess savings are dedicated to reducing the national debt.
C. Summary of the “Foreclosure Prevention Act of 2008”
The Foreclosure bill passed by the Senate on April 10 contains the following provisions designed to address the problems faced by families and their communities in light of the foreclosure crisis:

· FHA Modernization. To ensure that additional families can access the FHA program, which provides safe, fixed-rate mortgages, significant FHA reform is included to modernize, streamline and expand the reach of the FHA program. Under this bill, the FHA loan limit is increased from 95% to 110% of area median home price with a cap at 150% of GSE limit (currently, $625,000), allowing families in all areas of the country to access homeownership through FHA. Downpayments of 3.5% will be required for any FHA loan and counseling requirements are enhanced to help provide for stable homeownership.
· Assisting Communities Devastated by Foreclosures. Homes that have been foreclosed upon and are sitting unoccupied lead to declines in neighboring house values, increased crime and significant disinvestment. To ensure that communities can mitigate these harmful effects of foreclosures, $3.92 billion is provided to communities hardest hit by foreclosures and delinquencies. These supplemental Community Development Block Grant Funds will be used to purchase foreclosed homes, at a discount, and rehabilitate or redevelop the homes to stabilize neighborhoods and stem the significant losses in house values of neighboring homes.

· Providing Pre-Foreclosure Counseling for Families in Need. To help families avoid foreclosure, this bill provides $150 million in additional funding for housing counseling. These funds will be distributed by the Neighborhood Reinvestment Corporation by the end of 2008 to ensure families can quickly get the help they need. As many as 250,000 additional families connect with their mortgage servicer or lender to explore options that will keep them in their homes as a result of these counseling funds. In addition, $30 million is provided to help provide legal services to distressed borrowers.

· Enhancing Mortgage Disclosure. To ensure that consumers are provided with timely and meaningful disclosures in connection with mortgages, the bill expands the types of home loans subject to early disclosures (within three days of application) under the Truth-In Lending Act (TILA) including re-financings. The bill requires that disclosures be provided no later than 7 days prior to closing so borrowers can shop for another loan if not satisfied with the terms. The bill requires a new disclosure that informs borrowers of the maximum monthly payments possible under their loan, and also increases the range of statutory damages for TILA violations from the current $200 to $2000 to $400 to $4000.

· Preserving the American Dream for Our Nation’s Veterans. To assist returning soldiers avoid foreclosure, this bill lengthens the time a lender must wait before starting foreclosure from three months to nine months after a soldier returns from service and also provides returning soldiers with one year relief from increases in mortgage interest rates. In addition, the Department of Defense is required to establish a counseling program to ensure veterans and active service members can access assistance if facing financial difficulties. Also included is a provision that increases the VA loan guarantee amount, so that veterans have additional homeownership opportunities. The bill contains provisions to do the following:
· Increase benefits paid to veterans with disabilities such as blindness for the purpose of adapting their housing; provide a moving benefit to servicemen and woman who are forced to move out of rental housing because the owner of the housing was foreclosed on; provide that veterans benefits received in a lump sum are treated the same for the purposes of eligibility for housing assistance as monthly benefits; and to allow the Veterans Administration to provide for improvements and structural alterations to homes of veterans with service connected disabilities.

Lori Koblinsky, Account Manager
Old Republic Title & Escrow, Lynnwood, WA
Direct: 425.308.0191

Tuesday, August 5, 2008

Rolling Interest Rates over the Last Year

The information below was provided by Hank Stecker with Windermere Mortgage Services.

Friday, August 1, 2008

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Similar to fashion, cuisine and interior decorating, the art of gardening is multi-dimensional. It is not composed simply of foliage and flowers, but rather definitive color schemes, textures, well thought out design and the use of quality products. From urban rooftop gardens to chic water atriums, a garden is yet another way to emphasize the beauty and ambiance of any luxury residence. With eco-friendly options becoming more luxurious and accessible, trends in the gardening world are changing for novice hobbyists and garden design experts alike.

Gardens can be created in virtually any environment. From the deserts of Dubai to mountainous regions of Colorado, these are a few of the latest trends moving up on the list of luxury garden design.

Container Gardens - Popping up everywhere in Manhattan brownstones and Los Angeles lofts, these gardens continue to gain popularity. Space can present a challenge, but creating a classic garden in a metropolitan area is possible. Tips: Grow plants up versus out. Honeysuckle, jasmine, ivy and herbs work perfectly. Terracotta pots are a great option for container gardens, as the clay absorbs water and keeps the soil damp longer, which means less watering. Even if you have plenty of space, you can use container gardens to highlight entertaining areas or line stairways or walkways.

The Foliage Craze - Colorful, variegated, bold and lacy are just a few words to describe this garden forward trend: foliage. With no concerns of a blooming season, foliage is growing in popularity. Gorgeous shades of bronze, plum, claret and brightly tinged yellows and greens allow you to create the perfect look. Formerly used as a garden accent, foliage can now be used as the sole "ingredient" in your garden.


Water Gardens - Does the idea of converting your swimming pool into a natural swimmable pond - complete with aqua foliage - sound odd? It is currently one of the country's hottest garden trends. Incorporating plant life and d├ęcor to mimic those of natural water areas in our ecosystem, these ponds are self-cleaning and offer a lake-like swimming experience, involving no harsh chemicals.
Designers like Larry Santoyo - for Earth Flow Design Works - combine artistry and ecology, and can help you create functional garden design.

Edible Landscapes: New Rage in Haute Cuisine
Edible gardens and landscapes are creating quite a stir as luxury home owners around the country are creating interactive, edible gardens. Besides enjoying the visual beauty, these gardens entice all five senses and allow you to prepare elegant meals with freshly harvested ingredients. The mixed greens salad with truffle oil dressing allows you to combine elements from your own garden and an undeniably lavish ingredient that continues to gain popularity: truffle oil.

MosquitoNix is an environmentally sound solution for protecting your garden. A misting system is installed around the perimeter of your garden - a variety of custom and unique techniques are available. Mist is released 3-4 times a day, 45 seconds each time. Rosemary, cinnamon and lemon grass oils repel pesticides that can cause harm to your garden. Eco-friendly and 100% safe around children, pets, furniture and food - this solution is a great alternative to hazardous pesticides.
Baume Du Jardinier (Gardener's Hand Healer) - If your hands have endured elements of water, wind, sun and dirt while gardening, this shea butter cream is the answer. Its light lemon scent and combination of chamomile, rosemary, mimosa and lemon balm aid in its healing power and protects hands.

Garden Art - Incorporate your decorating style into your garden with these en vogue pieces: A stunning, copper column fountain designed by Hugo McCloud - who was featured at the Sundance Film Festival and San Francisco Garden Show Design Competition. His garden pieces are comprised of elegant details and eco-friendly materials. As evidenced by a growing celebrity interest garden gongs and bells are another en vogue option. Designed by Tom Torrens, these bronze and steel pieces add distinct flair to avant-gardens and are made with all natural components. Available at Water + Stone Gallery.

Simple Tips to Keep Your Garden "Green"
• Water in early morning and late afternoon. This allows water to soak in and not
evaporate as quickly.
• Work with flowers that are indigenous to your region. They require less water
and maintenance. Smith & Hawken offer insightful tips on selection process.
• Use drip systems, soaker hoses or sprinklers that have multiple settings, so the water isn't wasted on non-garden areas.
• Select flowers that attract bumblebees, hummingbirds or butterflies. These "friendly" creatures naturally help pollinate and propagate gardens.
• Select perennials to serve as your garden's "framework." Throughout the seasons, implement annuals for new color and fresh variety. This technique will help provide easy maintenance and the ability to incorporate new hues and styles.

This article supplied by LUXETRENDS by Windermere:
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