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Tuesday, January 19, 2010
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84 comments:
I rode the Orange line this morning, and due to an 'incident' at Eastern Market, the system was backed up badly. So I had to post this (YouTube--sound not necessary).
Xpovos-
Wow remind me not to take a train in China. When you think of what it is like in other countries it doesn't seem so bad having to wait 15 minutes for a train.
Also I find it amazing that people don't die on these trains.
hb,
That's Japan. And in all honesty, that situation is abnormal, even there. It's the rush hour train in the evening. But it's a huge concern, because it is unsafe, and there are always a huge number of substantiated claims of sexual assaults on the trains as well.
It puts our system in perspective, huh?
novahog made alink yesterday that says "The Real Estate crisis is entirely one of the Dems Making"
Nice try, kind of Like OJ's book "I didn't do it".
Let's look at the first article from CNS inside the TVC Article
Barry Zigas, who also spoke at the forum, “The Community Reinvestment Act and the Sub-Prime Mortgage Crisis: Is There a Connection?” disagreed with Roberts.
The number of CRA loans was few, said Zigas, and most did not perform too badly. They also had a positive impact in the communities in which they were granted,” he said.
“These loans that were made did not perform spectacularly badly,” said Zigas. “They performed weaker than prime loans, but they did not perform anything like sub-prime loans.”
Zigas added that the number of CRA loans were not enough to cause a crisis on their own.
“When I worked at Fannie Mae, we averaged $700-billion a year in financing,” said Zigas. “In that scheme of things, $3 billion [in CRA] loans is a relatively small amount. To suggest that banks just gave up the keys to the kingdom is just incorrect.”
CRA was a 1970's era statute. If it takes 30 years for a policy to crash, it's not bad policy.
The policy was obviously working in the context of it's time period.
Besides There is no data that CRA had anything to do with the Subprime crisis. 50% of all Subprime mortgages were issued by non-CRA controlled institutions.
Subprime was done because it was profitable. The Yield Spread Premium on Subprime was 300% the YSP on Prime mortgages.
Why do banks run payday loan systems and credit cards to the poor? It's because the YSP is high.
They then securitized all this crap and pushed it onto end buyers.
Between 2001 and 2007, the GOP controlled the House and Senate. If the GOP wanted to change any statute they did. Certainly they changed Glass-Steagal, and eliminated all regs on futures and technical trading.
within a year of that we had Enron.
Within 5 years we had the 2007 melt down.
Why don't the GOP blame Enron on the Dems?
That train appears to be the Japanese Railway system. They have for decades used white gloved "Pushers" to get people onto the trains.
Opps I guess it was a Japan train not a Chinese one. Either way it looks awful to have to go on it.
Pat-
I don't think Novahog was saying it was all the Dems fault. I think he/she was just saying that Ace's article was also biased. There is no single truth too whose fault it is. Lots of people deserve the blame and depending on your political bias you will see different people getting more or less of the blame.
Personally I think Greenspan was the #1 guy closely followed Bush for deregulation, and the Dems for housing affordability programs. I think HGTV also deserves some of the blame for convincing people that your house can make you rich.
As reported by E. Razzi the IRS has finally put out the new 5405 for the home-buyer credits for purchases after Nov 6 2009.
An IRS 1st time homebuyer site
people on the orange line have to learn basic ideas of riding the crowded trains --- pass inside the car, do not block the bloody doors. it's not very comfortable to stand packed like sardines in the can, but more effective.
metro may consider removing some seats from the extra cars they use during the rush hour.
hb,
Tops of my list for blame were the loan originators who didn't care that the buyers couldn't afford the house, because the loan was being sold. and they were getting their cut.
Next on the list were the banks for obfuscating the risk via the securitization. Followed quickly by the ratings agency who failed to do proper due diligence.
Any one of those three falls down and the crisis either doesn't hit or doesn't hit as hard. And none of them has to do with politics.
Important note if people hadn't caught it, or had forgotten it:
(following the link to the Q/A at the IRS)
Q. If I claim the first-time homebuyer credit in 2009 and stop using the property as my main home before the 36 month period expires after I purchase, how is the credit repaid and how long would I have to repay it?
A. If, within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full amount of the credit is due at the time the income tax return for the year the home ceased to be your principal residence is due. The full amount of the credit is reflected as additional tax on that year's tax return. Form 5405 and its instructions will be revised for tax year 2009 to include information about repayment of the credit. (05/06/09)
Is it just me or did they just exclude military personel from being able to usefully make use of this again? (unless you consider it to be like a zero-interest balloon payment government loan).
Cara,
It's possible to not be reassigned within 36 months. But, who would want to chance it?
Xpovos,
It's odd. Because I thought they had just a few months prior gone in and "fixed" that provision, such that re-assigned military personel would be able to take advantage of the credit. Maybe there's some special provision that's not in the Q/A that I just haven't stumbled across.
XPovos.
Securitization was allowed because the regs on who could sell what and who could buy what were relaxed.
It used to be to get a product sold, you needed Federal Reserve or SEC approval. They dumped that in favor of letting "The Market" decide.
Then, Rules on what funds could buy what were changed. Hedge funds were utterly unregulated, the hedge funds would borrow from the big banks in return for taking positions in these securities.
finally
The development of CDS and Derivatives needed a massive market for RMBS and CMBS. CDS was created as a unregulated market by Phil Gramm.
it was greed and institutional corruption driven by Gramms feeding of the banksters.
greenspan was a nutjob, and gramm was getting greased through his wifes job at Enron.
Cara-
I thought there was a different bill that helped military with the tax credit before the 8K was extended. I could be wrong about this.
Xpovos-
Those are also very good people to blame. As I said there are plenty of people that deserve the blame. I mean surely the average person who bought a house they couldn't afford with a mortgage they didn't understand also deserves the blame.
hb,
It was a different bill.
But upon deeper searching it looks like the fix remains in effect for the new bill, so no funny business here.
Additionally, there are new benefits for members of the military and certain other federal employees:
Members of the military and certain other federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and qualify for the credit. Thus, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2011. If a binding contract is entered into by that date, the taxpayer has until June 30, 2011, to close on the purchase. Members of the uniformed services, members of the Foreign Service and employees of the intelligence community are eligible for this special rule. It applies to any individual (and, if married, the individual’s spouse) who serves on qualified official extended duty service outside of the United States for at least 90 days during the period beginning after Dec. 31, 2008, and ending before May 1, 2010.
In many cases, the credit repayment (recapture) requirement is waived for members of the uniformed services, members of the Foreign Service and employees of the intelligence community. This relief applies where a home is sold or stops being the taxpayer’s principal residence after Dec. 31, 2008, in connection with government orders received by the individual (or the individual’s spouse) for qualified official extended duty service. The credit is still allowable even if this happens during the year of purchase. Qualified official extended duty is any period of extended duty while serving at a place of duty at least 50 miles away from the taxpayer’s principal residence (whether inside or outside the U.S.) or while residing under government orders in government quarters. Extended duty is defined as any period of duty pursuant to a call or order to such duty for a period in excess of 90 days or for an indefinite period.
hb,
I have a hard time blaming the end buyer because they were panic-stricken into bad purchases. Most people I've found are financially illiterate. It's taken years to get my wife to the point where she is, and it's not because she's dumb, but because her family is just very stereotypical when it comes to this. Bad money habits, lives paycheck to paycheck, and those habits are passed on because nothing better is taught.
I blame the banks for the securitization, but not the politicians for loosening it because securitization in and of itself isn't a bad thing, and if done properly the lax regulation could have resulted in good things. The problem stemmed because again, since the product was being sold to someone else, no one needs to do due diligence. If they had to keep the securitized product, or even a significant portion, they would have and it's a non-issue. Even then, if they'd been allowed to feel the full effect of their poor decision making, at least it would impact caution in the future, but that (the bailout) is one thing I can blame the politicians for. but that's an after-effect, not a factor in the bubble itself. Unless you believe the banks believed that they had zero risk because they'd be bailed out because they were too big to fail. I don't believe that.
Ok. So, I have to tell everyone here my news. After searching for about a year plus, we've finally put in an offer on a house. (It would be much more dramatic to say that we got something under contract, but that's the best I can do right now.) It's a lowball on a short sale, in Loudoun County, slightly east of where were are now. Do I think our offer will be considered? No. We might be lucky if the bank counters. Our net offer (we asked for a seller subsidy) is 89% of asking price. While the house has been on the market a long time, the listing agent appears to be tough, getting good deals as a buyer's agent, commanding high percentages of asking price when she acts as listing agent. There usually aren't many deep discounts in that neighborhood, either.
On the other hand, three townhouses came onto the market in our current neighborhood, and I was taken aback by their high asking prices. Short sales and foreclosures here have closed in the low 300s; these townhouses are listed in the high 300s. If that's any indication of seller hope and confidence in the local market in this new year, there is it. Yet, I went to the one open house held this weekend, and no one else showed up. Not sure if it was the crummy weather, or the high asking price. The agent thought she was asking too much (it was 20k higher than a nicer comp), but the seller has no choice. She bought in 2004, and will be underwater if she doesn't get close to asking. That situation, one I'm sure many sellers are in, contributes to price stickiness.
So, I think it's a good sign that we might be able to get more for our townhouse, but of course, the final sale prices of those townhouses will be more telling of the state of the market.
Re: Blame. I personally think there is plenty of it to go around.
After all, neither the Dems nor the Repubs were responsible for near simultaneous real estate bubbles appearing in Ireland, Spain, UK, etc.
REdealSEEKER,
Best of luck on the short. The seller and agent just might accept your offer. Why? Well, a real solid offer is needed to spur the bank into action, and if nothing else should result in a "approved" sale price if you're willing to wait around. So, as far as the seller is concerned you could be a good bet for facilitating the sale, even if you, personally, refuse the bank's counter.
And you won't get any lower than your initial offer, so why not low-ball it. As long as you remain first in line for the right of refusal when the bank does counter, what do you have to lose?
Well, what we have going for us is a 22% down payment (not including our subsidy request). What we don't have going for us? There is apparently another offer or two out there, and I think that the other offer(s) couldn't possibly be lower than ours.
The house is gorgeous, curved staircase in the foyer, another staircase into the family room, and a bright sunroom behind the kitchen. We saw the house two weekends ago, and nixed it because of the unfinished basement. We then saw another house, basement finished, and decided this one was much nicer, and a little more convenient in its location.
The unfinished basement shouldn't put us off too much, though, because I saw a comp with a finished basement on frankly that sold for 160k over what we're offering. Even if the basement costs 20k or 30k to finish, I'm guessing that unless the market completely tanks, finishing the basement ourselves would add significant value (and space!).
Actually, I have no idea what it would cost to finish a basement, if you add a bathroom and a kitchenette....but, I can't imagine the cost of doing all this would not be recouped in a sale. (We'd plan on staying for many years, anyway.)
WSJ Article: "Souring Mortgages, Weak Market Force FHA to Walk a Tightrope"
Not sure if this will be accessible to everyone:
http://online.wsj.com/article/SB10001424052748704586504574654710172000646.html?mod=WSJ_Real+Estate_RIGHTTopCarousel
CNBC Article/blog: "Short Sale 'Fraud' Follow-Up"
It's a follow-up to the previous CNBC article posted re: RESPA and 2nd lien-holders.
http://www.cnbc.com/id/34937452
Mike,
thanks for the link.
Sorry to point out the least important tidbit, but this amused me:
Mr. Stevens, for his part, is painfully aware of how far the housing market is from recovery. He listed his northern Virginia home for sale last fall and already has slashed the asking price by $100,000, to $1.4 million. Before Christmas, he pulled the five-bedroom colonial off the market with plans to relist it later this year. He says he wants to live closer to Washington. "The commute is very hard," he says, "and the hours are very long."
Gee, he's really hurting there...
Mike-
Thanks for the article it was interesting.
WSJ Article: "Souring Mortgages, Weak Market Force FHA to Walk a Tightrope"
Not sure if this will be accessible to everyone
Tip of the day:
If you want to access a WSJ subscription only article, cut and copy the article title into Google and hit search. This bypasses the link to the paid WSJ article and shows the free version.
No idea why this works so well but it does 99% of the time. Especially if you're RSS'ing.
According to this there is a risk of a global "asset price collapse":
The interactive graphic from which the image below was obtained comes from the World Economic Forum's new Global Risk Report 2010 where (surprise!) an asset price collapse is viewed as not only the most severe, but the most likely global risk.
As this graph shows, an asset price collapse is the greatest risk in both, likelihood and severity.
I take "asset price" to include, but not limited to, stocks, money market funds/bank accounts and real estate.
But, nothing to worry about here in the DC area. We're special (so others tell me).
WSJ Article: "Souring Mortgages, Weak Market Force FHA to Walk a Tightrope"
My take on the article is that the last "Easy Terms" game in town is in the 4th quarter and the warning buzzing is sounding.
Urp. [sorry]
>glug<
Or should count as a sip?
So if FHA cranks on down the qualifications, to what other lender of low-down-payment-easy-terms-come-one-come-all should we next form a queue for?
I just wanna be first for a change. Ya know, be that first brave surfer to say "yeah, this is a good wave, water's good, the sun is out, and there is no coral"
:)
Texas Native,
It sounds to me more like they're going to let it go into overtime.
Although, really FHA is the overtime from the sub-prime game.
I don't think any of the modest changes they're suggesting would be a killer. And the thought that if it weren't for seller-paid downpayments the FHA would still today have enough reserves to cover 30 years of losses, is strangely comforting, given that this practice was short-lived (in terms of having >15% market share) and is now over.
At some point the increasing FICO scores and slowing price declines will make that scary graph of 60 day delinquencies by year of origination turn a corner. We won't know it until 2-3 years after the fact, but the FHA investigators should.
My favorite quote from Mike's article:
"Home builders are worried. "It would be a game changer for the industry" if down payments were raised, says Eric Lipar, chief executive of LGI Homes, a Texas-based builder of entry-level homes."
Raising the FHA down payment requirement would be welcome news to all of us prepared buyers with down payments in hand. Finally something that will limit the number of over-their-head idiots we have to bid against when looking at homes. Less competition equals lower comps all around.
Jeremy-
I agree it would be very nice if they made people save for their downpayments. In addition to having less competition and lower prices it would force people to get into the habit of saving. This is obviously a good thing in the long run, although could cause some short term pain.
Although I would love to hear that a 10% downpayment is the new minimum, I don't think this is likely. I think they will raise it to 5%-6%, which will help reduce prices some, but I doubt it will be a game changer. My guess is the impact would be some minimal price decline, but nothing exciting.
Jeremy,
One would hope.
If there were already only one bid per home, then this would drop prices almost immediately to meet buyer ability to pay. But since I dont' believe that's the case you have to work through the backlog of extra bidders first before prices could fall.
hb,
Depends. 5-6% at the low end is pretty easy. 5-6% at the high side of middle (say $400K?) is a different story. Much harder, even with high paying jobs without 'move-up' equity.
Around here I would expect to see a dp requirement increase hit higher end houses disproportionately hard.
I would expect the impact to be immediate since, per the article:
"Last year, through August, nearly seven in eight new FHA-backed loans carried down payments of less than 5%."
So 7/8 of all the FHA borrowers would have to delay their purchase until they cobble together almost double what they've managed to save so far. This should remove a lot of buyers from the bidding pool for several months I would think.
xpovos,
True, but the effect should also tapper off starting at around the conforming loan limit as the percentage of FHA buyers drops.
So I'd fiddle with what you said to say that the effect should peak at around $400k in some sort of gaussian.
Cara,
Assuming banks don't follow the FHA lead, I'll agree. If the banks follow the lead you lose the high-end bound for your Gaussian.
HEYYYY CONTRARIAN, ol buddy! Havent heard from you in a while.
You might have missed it but you were the topic of conversation a few weeks back.
At the time we were all wondering WHY YOU DELETED THE VAST MAJORITY OF EVERYTHING YOU HAVE EVER POSTED!!!!!
Care to comment?
Jeremy,
Only in those market segments where FHA buyers make up a significant fraction of the buyers.
If there were 10 bidders, and you only delay 5 of those bidders, there are still 5 extra bidders that have to find houses before prices can decline.
Even at the $400k price range a gift from the bank of mom and dad can be the difference between 3.5% and 5% down. That won't flesh out the DP of all 7/8 buyers but it could help say 1/8. And then if you figure another 2/8 were just choosing to put down as little as possible but actually had the funds, then you're only losing 4/8. And if the FHA buyers are less than half the market (they're less than 20% of the total market anyway) then you might not even notice the blip in demand as people save for a few more months.
HB said...I don't think Novahog was saying it was all the Dems fault. I think he/she was just saying that Ace's article was also biased..."
Correct. I thought it was pretty obvious. I suspect pat knew that too.
xpovos,
If they make the higher limits permanent then banks will follow the FHA loan limit lead, and the peak would shift...
Except wouldn't better FHA access to higher amounts mean more immediate demand in those price ranges???
Cara said:
"a gift from the bank of mom and dad can be the difference between 3.5% and 5% down"
In most cases, if a gift from mom and dad was a possibility then it was already exercised to get the borrower up to 3.5% in the first place. Raising FHA minimums won't automatically produce more people who sponge off their parents.
Cara & Xpovos-
I think closing costs plus FHA penalties are ~3-4% plus the 3.5% that you currently need means the buyers need ~7%. Moving the limit to 5% would mean they need 8.5% down, I assume that even on 400K house this wouldn't take longer than 6 months. So maybe there would be a stand off between buyers and sellers for a while, but I still don't see a massive change in prices.
Currently most banks are requiring 10% down, I don't see them raising this. They already have problems with the public perception that they aren't lending.
Cara said...
"If there were 10 bidders..."
That's one heck of an assumption in this market. Maybe at price points below 200k it would be possible, but not 500k+ where homes are sitting on the market for months.
Jeremy,
Raising the down payment needed wouldn't change the percentage of people who get parental help? Really?
Not to be thoroughly obnoxious here, but we are talking about middle class neighborhoods, and if you hadn't noticed, our bootstrap ideology aside, most people get to the middle class by being born in it....
And no one drank the kool-aid as thoroughly as the boomers. You tell them that their little Johnny can't buy his family a home without another $5k, but could if they just had a little more money? 1 out of 8 parents deciding that it's worth it seemed like an underestimate to me. Especially if deserving little Johnny already saved the 7% all on his own. 6 out of 8 kids have too much pride to bring this up as a suggestion, that I'd vaguely almost believe....
Cara-
Even if the house has 10 bidders. You should assume that they all have different bids. So if you get rid of half of them their is a 50% chance you would get rid of the top buyer and the price would fall to the next highest bid. Also I would assume that FHA bids tend to be higher, because they didn't need to save as long for the DP, so in fact there is probably a higher than 50% you would get rid of the top bid.
I don't understand this obession everyone has with requiring at least a 10% downpayment from 1st time homebuyers. You can have 1st time homeowners with 3-5% dp not default or get into trouble. I know plenty of people who got loans as 1st time homebuyers, 8-10 years ago, with low dps from a credit union. None of them have defaulted or have gotten into trouble. Of course, these people were given loans with 7-8% interest rates and the credit union kept the loan amount to ~2.5x their income.
My parents would not have been able to purchase their first home if they had been required to put 10% down. No one would rent a 2 bedroom apartment in San Jose to my parents because they had two small children. The apt communities would only rent them a 3 bdr apartment which cost more per month than buying a 1200 sq. ft duplex house. My parents monthy mortgage payments for their 1st home were less than 25% of their monthly income. So before condeming people that do not have 10% to put down, you might consider the situation my parents were in.
Jeremy,
It was a round number chosen to be similar to the 7/8, and appropriate for the bulk of the FHA purchasers.
I only know what I bid into. If you're bidding then you know what you're bidding against.
The WTF priced houses don't matter. They might as well not exist as inventory. They're like the shadow in plain sight. All the buyers are bidding on the same well-priced houses.
HayfieldGrad,
They want to be rewarded for their prudence as savers above and beyond avoiding PMI and getting the best rates and lower monthly payments.
There's nothing wrong with FHA in a flat or rising market. (like people who purchased 8-10 years ago faced)
housebuyer,
Good point, I would put it at at least 75% chance that the highest bidder or two were FHA.
if i asked the listing agent to show me the property would i lose the 'right' to my own agent?
(i know i've been asking the same questions just in different forms, but i still can't decide whether to get an agent for a home i'm interested but haven't seen yet)
hey Cara, who are you calling deserving little Johnny? :)
Cara said...
"housebuyer,
Good point, I would put it at at least 75% chance that the highest bidder or two were FHA."
I too agree, especially since FHA bids are usually for higher amounts to offset the hassle a seller has to deal with by taking them. Since we agree this is true, then can't we agree that this "lowers comps all around" as I stated earlier?
Cara-
Even in a rising market it can be a little risky. It shows the people were not very good at saving. So what is going to happen when they need to replace the 10K furnace or the 15K roof? On the other hand it is tough, because I don't think you should need to be wealthy to buy a house...
contrarion--
CPI was up .4% LAST MONTH--along with the cost of most all my monthly bills, as I already posted a few days ago.
Care to comment?
Oh, but that chart doesn't even show inflation or hyperinflation or a Treasury bill sell-off or a couple more countries getting out of petro-dollars, as risks, does it?
So I GUESS ALL THOSE RISKS ARE ZERO PERCENT.
LOLOLOLOL!
"Only in those market segments where FHA buyers make up a significant fraction of the buyers.
If there were 10 bidders, and you only delay 5 of those bidders, there are still 5 extra bidders that have to find houses before prices can decline."
Cara
It is my thesis there is an oversupply of dwelling units.
That a huge amount were built in the bubble (Build for 150-180/SF, sell for 300-400/SF, Rinse, Repeat).
This is why i believe the real trick is for the number of units to find a buyer, not the other way around.
I look at the Halstead on Columbia Pike 40% vacant. Myerton Apartments 30% empty. Those properties near clarendon.
Nope, Bernanke is desperate to keep these off the market, and would even pay Al Qaeda to blow up a few thousand towers in Miami before he'd see them hit the market.
However the world will out....
Pat,
what are the empty properties near clarendon? i wish there were a lot, but i do not see too much inventory there for sale. very few condos and almost no townhomes.
I suggest that Novahog and anyone else who wants to take issue with the article that I linked (a) read the article; and (b) find evidence (not opinions) to refute what the article reported.
Konstantin,
It's not near Clarendon but Courthouse:
2100 Lee Hwy #G04 will have a trustee's sale at 11:00am on Feb 3rd. Original principal is $277,349.67.
Last sale of similar unit
Good luck, if you're interested.
Reecon: If you live at the Belvedere or the Atrium I would be interested if you hear of any good 1 beds less than $400K. I'm with Konstantin and think this is a better way to find a condo than cruising up and down Wilson Blvd looking for lights in windows. Seriously, Pat, are you trying to find a condo that way?
For all those who seem baffled by Pat's comment about
"all the empty condos", I share your confusion.
For those of us who prefer data over driving around on wilson blvd at night, it appears that there are about 50% less condos for sale now than there were a few years ago.
http://www.recharts.com/mris/mris_15.html
I will leave it to others decide which is the more accurate measure of stress on the Arlington market.
"I'm with Konstantin and think this is a better way to find a condo than cruising up and down Wilson Blvd looking for lights in windows. Seriously, Pat, are you trying to find a condo that way?"
I don't want a condo.
what i want is a house where the market doesn't collapse 3 months after we close.
what i am afraid of is a big blop of shadow inventory hitting the market. Thats why i drive around looking at windows, those dark windows tell me there are lots of units available as "Shadow" inventory.
as a tool, look at Google maps and turn on foreclosures. that should frighten anyone.
condo buyer,
I can't believe those Atrium units are so expensive. When built, the 1 bedrooms were about a 100K and the builder gave 5K off to the first 50 or so buyers. People camped overnight to get the 5K.
If you go back and look at the records on that place, you will see that there was alot of flipping going on. This was mid-late 80's. On the larger units people were making a couple hundred grand on the flips. It was amazing.
"pat said...as a tool, look at Google maps and turn on foreclosures. that should frighten anyone."
What was really frightening was a year ago when the foreclosure count was 40% higher.
http://www.realtytrac.com/trendcenter/default.aspx?address=VA&parsed=1&stc=VA
Federal Housing Administration to raise fees
"The Federal Housing Administration is raising fees and tightening lending standards to shore up its strapped finances and avoid a taxpayer bailout.
The government agency has seen its losses rise with the foreclosure rate. Its reserves have sunk below the minimum level required by Congress. A healthy FHA is vital for the housing market because it insures roughly 30 percent of new loans, and is the largest backer of mortgages to first-time buyers.
The changes, which will go into effect in the first half of the year, "are among the most significant steps to address risk in the agency's history," FHA Commissioner David Stevens said in a prepared statement."
Let's not forget HAMP extension expires for good on 01/31...
Couple of agents are telling me we should see lot more properties on the market starting next month.
What cracks me up is this -
"The changes, which will go into effect in the first half of the year, "are among the most significant steps to address risk in the agency's history."
About time....
HayfieldGrad said
No one would rent a 2 bedroom apartment in San Jose to my parents because they had two small children. The apt communities would only rent them a 3 bdr apartment which cost more per month than buying a 1200 sq. ft duplex house.
This is almost certainly a violation of the Fair Housing Act. I don't think lending policy should be based on the fact that landlords violate the law. Instead of loosening lending standards the remedy would be enforcing the FHA's regulations on protecting family renters.
My parents FWIW were still renters when they had two young children. I think it was for their sanity and not landlord discrimination that they bought a house by the time child three came along (and later child four and five.)
I thought some might find this interesting. President Obama gave a speech at Graham Road Elementary School in Falls Church today.
I feel like in this first year Barack and Michelle Obama have visited more schools in Virginia than any president and First Lady in recent memory. I'm glad that we are getting the attention we deserve. :) (Okay, it might have more to do with VA being a swing state as compared to DC and MD...)
Robert,
Still bullish on federal spending in light of Brown's win in the MA Senate race?
Anon
The Fed has been for 2 years in "Extend and Pretend", which is just a real problem.
DC didn't have a housing shortage in 2003, and we had condo and TH projects shoved on every little chunk of land. far too many flippers got into multiple proeprties, and the specuvestors were sitting on multiple properties.
with rates shoved into the sewer people are holding on and hoping the magical appreciation bird will come save them, so rather then take losses and move on, people are bleeding.
can someone venture a guess at what the stable level of Foreclosures should be for the DC MSA?
I knew that the FHA would raise fees rather than raise the down payment requirement. What do people care if you add more onto the loan they can't afford anyway? And why make the most irresponsible suffer that can't even save 5% when you could instead spread the pain over as many people as possible? Sounds about right for our current government.
I was considering VA_Investor's idea of getting an assumable FHA loan as a hedge against interest rate increases, but that just got a bit more expensive. It will have to be a 15% down, 5% piggy-back if we buy this Spring. Looking more and more like next year at this point.
I would have to agree with Hayfield grad on the dp issue. Requiring high downpayments closes the door (no pun) on homeownership for many people.
Yes, some can hit up the parents, but many don't have or want that option. I know I felt that way. I was an adult and I wasn't running to mommy and daddy for help.
I had two FHA's in the 80's and assumed many more. Investors and occupants used to be able to assume FHA's with no application, proof of income or anything else for a $45 assumption fee. No apraisal, no points, no nothing.
I don't know what the default rate was on those assumptions.
But, back to Hayfield's point. If properly underwritten and apraised, coupled with the upfront and continuing MIP, these loans carry far less risk than the "bad" loans made earlier this decade.
DP is a barrier that can be insurmountable for many. The basic theme seems to be the benefit of less competition for the monied.
Ace,
I'm not really interested in getting into the blame game argument. When i see a site that is dedicated to fighting "conservative misinformation", i assume their research is going to slant left.
TBW said: "This is almost certainly a violation of the Fair Housing Act."
Couldn't it have something to do with occupancy limits? Doesn't sound like they wouldn't rent to them at all, they just wouldn't rent a 2BR apartment to a family of 4.
Tired Bubble Watcher Local governments enforce occupancy limits, typically under their zoning powers. There was a pretty famous case in Arlington a few years ago when a well-known condo would not let an owner have 3 children (2 boys and 1 girl) live in a 2 bedroom condo. The parents owned a 2 bedroom condo in the building and when a third child was born, the management said they had to move to a 3 bedroom condo. I am not sure how high it went in the Virginia court system, but the condo prevailed. The owner of the condo was also a pretty well-known figure in Arlington so it was an interesting case. In Arlington only 4 unrelated people can live in a dwelling. Of course there are all kinds of violations but most of the good condos enforce these limits. I am not sure what happens in townhouses and houses. Also, I know this will make most of you cringe, but Graham Rd. school receives a lot of funding and support from the Northern Virginia realtor board. We are trying to get the realtors to fund some programs for us at Cunningham Park in Vienna where my wife taught and where both of us currently tutor.
My cringe-o-meter goes off equally badly when I hear 'CRA!' from one side and 'Greedy Bankers!' from another.
"Never get a good crisis go to waste". I've heard that somewhere recently . . .
Jeremy,
Sorry for all the fuss. My point was really just that what may seem obvious may in fact not play out that way. I.e. there are circumstances under which an increase in FHA DPs wouldn't actually have a noticeable effect on the market. I agree with you on what should happen, I'm just not so sure it will happen.
I think the BofA statement today on the growing foreclosures throughout 2010 is a bigger story. Increased supply could be big for those areas that haven't fully corrected to income-related levels and yet have already seen some significant foreclosures (and hence are the most likely candidates to see many more). It's all about whether that exceeds demand.
The other under the radar thing was in the WaPo, as of February 1st? flippers will be able to sell to FHA buyers without an arbitrary 3 month holding period. It will be very straightforward for gross profits of under 20%, and a little more stringently watched for gross profits over 20%. But not having that unneeded extra 1-2 months of holding time could be huge. Conveniently timed for when the REOs should start hitting the market... If they ever hit the MLS at all. Think how much more attractive bulk purchases are now, even more so than they already were.
reecon-
I agree that through occupancy limits it is legal to limit the number of people living in a place, but it does seem really strange that they couldn't have 4 people live in a 2 bedroom. It is fairly normal to have the Mom & Dad in one bedroom and the kids share a bedroom. I would be amazed if they could legally force someone to get an additional bedroom for every kid they have.
MM,
If you contact the LA directly, yes, you may indeed be giving up your right to a separate buyer's agent. If you want to have a buyer's agent, you have to go through them.
(open houses don't count, unless the sign in sheet asks about your representation adn you don't write it down)
Novahog, I'm not interested in the blame game either, nor am I interested in arguing with people who won't read relevant information, preferring instead to disparage the writers.
Just to be clear the information that I posted was in response to a post from someone else bashing parties without posting any evidence.
Time to move on.
Reecon There was no problem when there were the two parents and the two children in a two bedroom condo. The problem occurred when the third baby was born and they wanted to have three children share a bedroom. The condo went to the county to find out if this was a problem and the county said that there was not enough square footage in the second bedroom to have 3 children in the bedroom. The people did eventually buy a 3 bedroom unit in the building and I think still live there.
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