Make Mortgage Approval Easier

Make Mortgage Approval Easier. Image courtesy of imagerymajestic / FreeDigitalPhotos.net

With new mortgage rules and regulations in place, buyers may face more obstacles when applying for a mortgage.

“Buying a home is likely the biggest purchase anyone will make, and community bankers are an excellent resource to help guide consumers through the process,” says John Buhrmaster, chairman of Independent Community Bankers of America and president and CEO of 1st National Bank of Scotia, N.Y. “Community bankers across the country can help their neighbors in their local community find mortgages that fit their financial needs, budgets, and lifestyles.”

ICBA, which represents more than 6,500 community banks across the country, recently offered several suggestions for prospective first-time home buyers seeking a loan, including:

• Collect paperwork and documents. Buyers should have paycheck stubs, W-2 forms, tax returns, and bank and investment statements for the last two years.
• Check credit reports. Buyers should know their current credit score before applying for a loan. Credit reporting agencies are required to give one free report annually.
• Keep tabs on spending habits. For example, maxing out credit cards or falling behind on other loan payments will likely create issues when applying for a mortgage. Buyers should avoid going on a spending spree before and after applying for a loan to avoid any hang-ups.
• Explore options. ICBA encourages buyers to work with community bankers to figure out how much to borrow and which mortgage product is right for them. They should explore mortgage options, including rate adjustments, fees, and other loan features, to avoid surprises at closing.
• Know the rates. “Learn what current mortgage rates are,” ICBA notes. “Your community banker can help you understand how that translates into monthly mortgage payments.”
• Look for special programs. Buyers may want to check with their state, city, and county government agencies for special first-time home buyer loan or grant programs available to assist with down payments and closing costs.

Source: Independent Community Bankers of America

Home Owners Doing Record Number of Cash Deals

Home Owners Doing Record Number of Cash Deals. Image courtesy of imagerymajestic / FreeDigitalPhotos.net

A record number of home owners are using the increased equity in their current homes to buy their next homes in cash and avoid the mortgage process altogether, Bloomberg reports.

About 29 percent of non-investment buyers used cash to fund their housing transactions in the first quarter of this year — the highest level on record, according to data compiled by Bloomberg.

Baby boomers make up a large bulk of these all-cash deals, says Lawrence Yun, chief economist for the National Association of REALTORS®.

“Cash purchases are on the rise because older home owners who have decades of home-equity accumulation don’t want the hassle of a mortgage,” Yun says. “With the economy improving and the stock market at record highs, boomers are the ones who are driving the market.”

Meanwhile, the share of investors — who usually use cash — is dwindling, dropping in the first quarter to the lowest level since 2010.

“The whole investor class, the ones doing most of the cash purchasing until now, is stepping back,” Yun says. “Baby boomers are taking their place.”

Baby boomers have more equity than previous generations because they may have owned a home during a 30-year “housing bull market.” In April, the median price of an existing-home was $201,700 compared to $67,800 in 1982, when many boomers had purchased their first properties, Bloomberg reports.

What’s more, about 16.3 million Americans older than 60 owned their homes outright in 2012, up from 12.1 million in 2009, according to Census data.

Baby boomers are expected to remain a strong presence in the housing market much longer than previous generations, too.

They “will be buying and selling well into their 80s because they are going to be active and healthier for a lot longer than their parents,” says John McIlwain, a senior fellow at the Urban Land Institute in Washington. “They are a rebellious generation, and they’re not going to go along with the idea of traditional retirement.”

Source: “Cash Property Deals Reach Record with U.S. Boomers Retiring,” Bloomberg Businessweek (June 2, 2014)

Trouble Looms for 2 Million Borrowers

Trouble Looms for 2 Million Borrowers. Image courtesy of David Castillo Dominici / FreeDigitalPhotos.net

About 2 million borrowers with modified mortgages are facing interest rate hikes, according to Black Knight’s April Mortgage Monitor Report. What’s more, about 40 percent of those borrowers currently remain underwater, owing more on their mortgage than their home is currently worth.

The lack of equity is one of the primary drivers of mortgage defaults and “these resets may indeed pose an increased risk in the years ahead,” says Kostya Gradushy, Black Knight’s manager of loan data and customer analytic. “We have seen a continual reduction in the number of underwater borrowers at the national level for some time now, but modified loans show a different picture.”

Nationwide, the negative equity rate is 9.4 percent of all active mortgages. An additional 18 percent of borrowers with modified mortgages have 9 percent equity or less in their homes, which poses some concern, Gradushy says.

“If you do not have about 10 percent equity in your home, you don’t make any money if you sell the house because closing costs are about 8 percent,” says Jim Gaines, research economist with the Real Estate Center at Texas A&M University.

Source: “Black Knight: 2 Million Borrowers Can’t Afford Rate Resets,” HousingWire (June 2, 2014)

Foreclosures Drop to Lowest Level Since Great Recession

Foreclosures Drop to Lowest Level Since Great Recession. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Over the last 12 months, completed foreclosures have fallen to the lowest level since the Great Recession began in 2007, according to CoreLogic’s April National Foreclosure Report, which shows completed foreclosures fell to 599,000 nationwide.

Completed foreclosures – the total number of homes actually lost to foreclosure – was 46,000 nationally in April, down 18 percent from April 2013. Foreclosures still remain elevated by historical standards. Before the housing decline in 2007, completed foreclosures averaged 21,000 per month between 2000 and 2006.

Since September 2008, there has been about 5 million completed foreclosures nationwide.

In April, about 694,000 homes were still in some stage of foreclosure, known as foreclosure inventory. Inventory levels are down 35 percent year-over-year. The foreclosure inventory in April represented 1.8 percent of all homes with a mortgage, according to CoreLogic’s report.

At the current pace, “it will take 14 months to move all of the foreclosed inventory through the pipeline,” says Sam Khater, deputy chief economist for CoreLogic.

“We have now registered two and a half years of continuous decreases in the number of home owners who are in some stage of the foreclosure process,” adds Anand Nallathambi, president and CEO of CoreLogic. “This consistent decline means fewer Americans are experiencing the distress of delinquency and default.”

Every state – except for New York and the District of Columbia – reported double-digit year-over-year decreases in foreclosures, according to CoreLogic.

The following five states have the highest foreclosure inventory (as percentage of all mortgaged homes):

• New Jersey: 6%
• Florida: 5.4%
• New York: 4.6%
• Hawaii: 3.1%
• Maine: 3%

Meanwhile, the five states with the lowest foreclosure inventories are Alaska (0.4%); Wyoming (0.4%); North Dakota (0.5%); Nebraska (0.5%); and Minnesota (0.5%), according to CoreLogic’s April report.

Source: CoreLogic

When a Home Poses an Environmental Risk

When a Home Poses an Environmental Risk. Image courtesy of scottchan / FreeDigitalPhotos.net

Real estate professionals often must evaluate environmental risks associated with property deals. Identifying, assessing, and minimizing such risks has become more complicated in light of several recent developments: most notably, changes to risk evaluation standards; a renewed regulatory emphasis on environmental compliance and enforcement; and a spate of transactions stemming from the recession.

In real estate terms, “environmental risks” refers most often to risks stemming from environmental conditions of a property. However, the definition also may refer to risks based on regulatory programs concerning a property or resource limitations.

In general, every property should be evaluated for potential soil, groundwater, and vapor contamination. Usually, a Phase I Environmental Site Assessment or Transaction Screen will suffice for this purpose.

Depending on the property, however, a more comprehensive evaluation may be needed to assess other potential risks — including asbestos contamination, mold, wetlands, water resources, endangered species, and more — that can trigger liabilities.

Source: “Evaluating Environmental Risks in Real Estate Transactions,” National Law Review (May 29, 2014)