Shadow Inventory Increases Likely

The volume of bank-owned properties and potential foreclosures not listed for sale is up 10 percent to 2.1 million compared to August 2009, according to new estimates from research firm CoreLogic.

Together with the 4.2 million inventory of listed homes, which is unchanged from a year ago, CoreLogic estimates the supply of homes at 6.3 million or about 23 months at the current sales pace.

Some experts say these numbers are conservative. Analysts at Barclays Capital believe there are another 3.76 million homes somewhere in the foreclosure process, down from a peak of 4.22 million at the end of February.

Source: The Wall Street Journal, Nick Timiraos (11/22/2010)

New Lending Guidelines Benefit Young Borrowers

Under Fannie Mae’s new lending guidelines, which will take effect Dec. 13, securing a mortgage will become easier for some borrowers and more difficult for others.

These new rules will allow buyers to use gifts and grants from nonprofit groups for their minimum 5 percent down payment. Freddie Mac is also considering similar new guidelines, according to spokesman Brad German. Borrowers previously were required to contribute a minimum 5 percent down payment from their own funds, with additional down payment money permitted from a gift.

These new rules are “definitely going to help upgrade buyers and young couples who for whatever reason don’t have enough money and are getting some from their families,” said Edward Ades, the owner of broker Universal Mortgage. The gift rules apply only to single-family principal residences and cover mortgage amounts in excess of 80 percent of the property’s value. The loan balance also has a limit of $729,000 in high-cost areas like New York City and $417,000 in other areas.

At the same time, Fannie Mae is cracking down on debt-to-income ratios, with the maximum ratio for those seeking a conventional mortgage set to drop from 55 percent to 45 percent under the new guidelines. Fannie Mae is also increasing its scrutiny of payment histories on revolving debt, and buyers who have missed a payment will have 5 percent of the total balance added to their ratios.

Under the new rules, borrowers who have gone through foreclosure will be excluded from obtaining a Fannie-backed loan for seven years, an increase from the previous limit of four years.

Source: The New York Times, Lynnley Browning (11/21/10)

7 Trends That Will Drive the Future of Housing

Hanley-Wood’s ProSalesOnline.com identifies seven trends that the magazine’s editors believe will have the biggest impact on housing in 2011.

1. Big builders are wringing the extras out of construction costs and dropping the national average cost-to-build 36 percent to $52 per square foot.
2. Starting in 2011, Energy Star will ramp up its efficient design and quality installation standards. To get Energy Star certification, builders will have to install the right insulation, HVAC systems, and other features related to energy efficiency correctly every time.
3. Sheds are the next evolution. As homes get smaller, a separate shed will become a popular home addition.
4. There are 81 million “Echo Boomers” who were born from 1981 to 1999, compared to just 78 million Baby Boomers born from 1946 to 1964. These children and grandchildren of Boomers will drive home-building for years.
5. By 2015, demographers say, more than two out of every five households occupied by Generation Y people born between 1981 and 1999 will be WINKs (women with incomes and no kids).
6. Make room for the “Sandwich Generation” – Baby Boomers living with both their kids and their parents. These families like having two master suites, a second cooking area, and lots of storage.
7. Baby Boomers want to keep working and continue to live where they have always lived. They want a first-floor master bedroom near the washer and dryer and lots of convenient storage.

Source: ProSalesOnline.com (October 2010)

Big Banks Fixing Foreclosure Processes

Bank of America and J.P. Morgan Chase told the Senate Banking Committee on Tuesday that they were making changes in their foreclosure processes after reviews found areas that needed improvement.

Barbara DeSoer, president of Bank of America’s home loan business, said the company has set up a new form for creating foreclosure affidavits.These are documents that summarize the facts of a foreclosure case such as a borrower’s name and total amount owed.

Those documents, she said, “will be individually reviewed by the signer” and notarized. The company, she said is “carefully restarting” the foreclosure process.

The Congressional Oversight Panel, however, warned in a report Tuesday that the foreclosure document problems “may have concealed much deeper problems in the mortgage market that could potentially threaten financial stability.”

A Treasury spokesmen disputed that claim, saying that 11 federal agencies are investigating the issue and they don’t believe it represents a threat to the U.S. financial system.

Source: Associated Press, Alan Zibel (11/16/2010)

Banks, Congress to Face Off on Foreclosures

Banks will appear before the Senate Banking Committee on Tuesday to explain sloppy mortgage paperwork, but observers aren’t expecting much Congressional harmony on the topic. Senators are likely to press lenders on the question of whether “robosigners” are evidence that modifying loans is better than eviction.

On the House side where lenders are expected to appear before the Financial Services Committee on Thursday, U.S. Rep. Spencer Bachus, an Alabama Republican and next year’s front-runner for chair of the panel, has criticized federal regulators instead of bankers. “It is disappointing that the regulators didn’t catch this before the media,” he wrote in an e-mail.

Outsiders see only gridlock. “I have no hopes for this Congress whatsoever,” said John Taylor, president of the National Community Reinvestment Coalition.

Source: Reuters News, Dave Clarke and Joe Rauch (11/15/2010)