Shelli Dore’s Real Estate Blog

Archive for November 2009

Even as the housing market continues to stagger, foreclosure filings in October declined for the third month in a row. Foreclosure filings were reported on 332,292 properties last month, or 3 percent fewer than September’s tally, real estate firm RealtyTrac said today. Even though filings remained 19 percent higher than a year earlier, “[t]hree consecutive monthly declines is unprecedented for our report,” RealtyTrac CEO James Saccacio said in a statement. But with unemployment busting through the 10 percent threshold and a slew of state and federal initiatives against foreclosures in place, foreclosure trends aren’t as optimistic as they may appear in this report. Here are five things you need to know:

1. Obama rescue: The monthly foreclosure decline comes as the Obama administration ramps up its sweeping effort to get as many as 4 million struggling homeowners into more affordable mortgages. On Tuesday, the Treasury Department said it had extended more than 650,000 trial loan modifications through October, putting it on track to meet its ambitious goals. However, mortgage modifications have a checkered history of success, and it remains unclear how many of these borrowers will simply fall behind on their new loans. The concern is that the program may be delaying foreclosures rather than preventing them. “Every loan servicer or lender I have spoken to in the last couple months has basically told me that they have had to slow down foreclosure initiations because they have had to re-evaluate their portfolio of loans to see which ones qualify for [a rescue program],” says Rick Sharga, RealtyTrac’s vice president of marketing. There are about 5.5 million delinquent loans. It just takes an awful lot of time to go through each loan individually.”

[Check out Obama’s Loan Modification Plan: 7 Things You Need to Know.]

2. State rescue efforts: While the Obama administration’s is the most expansive, the foreclosure crisis has prompted a number of state governments to launch housing rescues of their own. But as was the case with the Treasury Department, it’s possible that these state-level initiatives are just postponing reality. Take Nevada, for example. With 1 in every 80 households getting a filing last month, Nevada has the nation’s highest foreclosure rate. However, a new state law requiring foreclosure mediation helped trigger a 26 percent plunge in foreclosure activity from September and a 4 percent drop from a year earlier, Sharga says. Mediation very well may put some troubled borrowers into sustainable home loans, but it’s quite likely that others will just redefault at a later date. “The intention is good,” Sharga says. “But there will be a bill to pay at the end of this.”

3. Seriously delinquent: To get a sense of where foreclosures may head from here, economist Patrick Newport of IHS Global Insight points to Fannie Mae’s serious delinquency rates, which track loans mostly made to well-qualified borrowers. The serious delinquency rate hit 4.45 percent for single-family-home loans in August, up sharply from 4.17 percent in July and just 1.57 a year earlier. “That number keeps on growing, and the monthly increments keep getting bigger,” Newport says. “I am almost sure that the foreclosure rate is going to continue to rise.”

4. Unemployment problem: These days, the primary driver of home foreclosures isn’t exotic mortgage products but the nation’s dismal labor market. As more people lose jobs, a growing number of borrowers—even those with sound credit histories—can no longer pay their mortgage. And with the unemployment rate hitting 10.2 percent last month, job losses will continue sending homeowners into foreclosure. “I don’t think that foreclosures are going to peak until the unemployment rate does,” Newport says. Newport projects the unemployment rate will peak at around 10.5 percent sometime in the middle of next year.

5. Hole in the rescue: Rising unemployment also highlights a gaping hole in the Obama administration’s housing rescue. Homeowners need an income stream in order to qualify for a modification, which makes anyone who can’t pay their mortgage because of a job loss ineligible. But borrowers facing foreclosure after losing a job are increasingly at the heart of today’s housing crisis. The administration’s initiative “was not designed to address foreclosures caused by unemployment, which now appears to be a central cause of nonpayment,” a congressional oversight panel said in an October 9 report. “It increasingly appears that [the Obama administration’s housing rescue] is targeted at the housing crisis as it existed six months ago, rather than as it exists right now.”

By Luke Mullins
Posted: November 12, 2009
USNews

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Shelli Dore

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Here are some of the most frequently asked questions on the changes to the Homebuyer Tax Credit:

Question: Existing homeowner credit: Must the new house cost more than the old house?

Answer: No. Thus, for example, individuals who move from a high cost area to a lower cost area who meet all eligibility requirements will qualify for the $6500 credit.

Question: I am an existing homeowner. On October 25, 2009, I signed a contract to purchase a new home. I have lived in my current home for more than 5 consecutive years and am within the new income limits. I will go to settlement on November 20. If President Obama has signed the bill by the time I go to settlement, will I qualify for the new $6500 tax credit?

Answer: Yes. The existing homeowner credit goes into effect for purchases after the date of enactment (when the bill is signed). There is no reference to the date of contract for the new credit. The provision looks solely to the date of purchase, which is generally the date of settlement.

Question: I am a first-time homebuyer but was not within the prior income limits at the time I entered into my contract to purchase on October 30, 2009. I will be covered, however, by the new income limits. If the new rules have been signed into law by the time I go to settlement, will I be eligible for a credit?

Answer: Yes. The new income limitations go into effect as soon as the President has signed the bill. The income limit and other eligibility rules will look to your status as of the date of purchase, which is the settlement date. So if the new rules have been signed when you go to settlement, you should be eligible for the credit (or a portion of the credit if you’re within the phaseout range).

Question: I am an eligible existing homeowner. I have a fair amount of equity in my home. I have found a home with a nonnegotiable price of $825,000. Will I be able to use any of the $6500 tax credit?

Answer: No. The $800,000 cap on the cost of the purchased home is firm at $800,000. Any amount above $800,000 makes the home ineligible for any portion of the credit. The $800,000 is an absolute ceiling.

Question: I owned my home for 10 years, but sold it two years ago year and have been renting since. If I purchase a home, will I be eligible for the $6500 tax credit if I meet all the other eligibility tests?

Answer: Yes. Because you lived in the home for more than 5 consecutive years of the previous 8, you will qualify for the $6500 credit. For example, Say John and his wife bought a home in 2000 and lived there until 2008 when he got a divorce. Whether John has been renting or bought in the interim, he WOULD INDEED be eligible for the credit because he owned a home and occupied it as his principal residence for 5 consecutive years out of the last 8 years. The keyword here is “consecutive.” As long as he lived in that house for 5 years straight what he did since 3 years doesn’t impact eligibility.

Question: I am an eligible first-time homebuyer. I entered into a contract to purchase on November 1, 2009. Do I have to go to closing before December 1? How does the extension date affect me?

Answer: You do not have to close before December 1. Once the legislation has been signed, it will be as if the Nov 30 date had never existed. Therefore, so long as the contract settles before April 30 (or July 1, worst case), the purchaser will be eligible for the credit.

National Association of REALTORS® Government Affairs Division

500 New Jersey Avenue, NW, Washington DC, 20001

Your friend in the real estate business,

Shelli Dore

Friend me on Facebook!
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…Remember! The next time you are in a conversation with someone who is thinking about a move – IN ANY CITY OR STATE IN THE US OR CANADA – call me first! I can help make sure your friends, family members and work associates are very well taken care of.

October MLS Statistics are now available!
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Your friend in the real estate business,

Shelli Dore

Friend me on Facebook!
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…Remember! The next time you are in a conversation with someone who is thinking about a move – IN ANY CITY OR STATE IN THE US OR CANADA – call me first! I can help make sure your friends, family members and work associates are very well taken care of.

http://ping.fm/SM2gG

Your friend in the real estate business,

Shelli Dore

Friend me on Facebook!
Connect with me on LinkedIn!
Follow me on Twitter!

…Remember! The next time you are in a conversation with someone who is thinking about a move – IN ANY CITY OR STATE IN THE US OR CANADA – call me first! I can help make sure your friends, family members and work associates are very well taken care of.

My family and I salute those who serve in our military. We know, that without them, we would have nothing that we now have. From the bottom of our hearts, thank you…


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