Short sales just got better

saint-louis-real-estate-dennis-normanI have good news for homeowners that are underwater on the mortgage and need to do a short sale, or for buyers looking to buy a short sale.  The Federal Housing Financing Agency just issued new guidelines to lenders that service Fannie Mae and Freddie Mac loans that are intended to “offer a streamlined short sale approach” which will be music to the ears of anyone that has been through the process.   I don’t always agree with the actions of the FHFA but I think this is a good move and will help the market.  The new guidelines (see below for highlights) go into effect November 1, 2012 Continue reading “Short sales just got better

Home Affordable Refinance Program (HARP) Extended One Year

Dennis Norman St LouisThe Federal Housing Finance Agency (FHFA) announced it has extended the Home Affordable Refinance Program (HARP) to June 30, 2012. The HARP program was scheduled to end June 30, 2011.

This program is designed to help homeowners whose homes have lost value. Through 2010 there have been 621,803 HARP refinances with loan amounts from 80 percent of value up to 125 percent of value.

For more information, or to see if you are eligible for HARP, click here.

Private Transfer Fee Covenants Draw Fire From FHFA

Dennis Norman

Today the Federal Housing Finance Agency announce proposed guidance that would prohibit Fannie Mae, Freddie Mac and the Federal Home Loan Banks from investing in mortgages with private transfer fee covenants. Considering that covers the lenders that originate, invest in or, or insure over 90 percent of the homes in the U.S. that pretty much puts the kibosh on financing a home with such a transfer fee. Continue reading “Private Transfer Fee Covenants Draw Fire From FHFA

Is The Government Going to Push Us Into Another Housing Bust?

Dennis Norman

UPDATE June 21, 2010- I said I would update this post after the proposed rules were published on the Federal Register with info on how to submit a comment -If you would like to comment, see the comment instructions in the Federal Register (I highlighted them) by clicking here -end of update.

June 4, 2010

Are they really going to repeat the same mistakes that helped cause this housing recession?

I say this because of a release I received from the Federal Housing Finance Agency (FHFA) last week announcing that the FHFA “has sent to the Federal Register a proposed rule implementing provisions of the Housing and Economic Recovery Act of 2008 (HERA) that establish a duty for Fannie Mae and Freddie Mac (the Enterprises) to serve very low-, low- and moderate-income families in three specified underserved markets — manufactured housing, affordable housing preservation, and rural markets.” While the statement is a little ambiguous on the surface it sounds like a nice thought, “serve the underserved.”

However, as I read on I couldn’t believe my eyes as I read other aspects of the proposed rule. The “Enterprises” (Fannie and Freddie) would be required to take actions to “improve the distribution of investment capital available for mortgage financing for underserved markets” and are expected to continue their support for affordable housing (again, something that sounds great, just depends how you plan to go about supporting “affordable housing”). The rule would establish a method to evaluate the Enterprises performance in these underserved markets for 2010 and subsequent years. Of the four criteria the enterprises are to be evaluated under, one really got my attention; “the development of loan products, more flexible underwriting guidelines, and other innovative approaches to providing financing“. WHAT?? More FLEXIBLE underwriting, INNOVATIVE approaches to provide financing? Isn’t this the stuff that got Fannie Mae and Freddie Mac (not to mention thousands of homeowners) in trouble to start with? Now, I don’t claim to be an economist or even that smart for that matter, but this sure appears to me to be the Federal Government putting pressure on Fannie Mae and Freddie Mac to make loans they shouldn’t be making….again.

I’m not saying that the pressure on Fannie Mae and Freddie Mac to make loans to borrowers that weren’t really qualified is the only cause of the housing bust as there were many contributors to it, but this was certainly one of them and definitely a large part of what led to their financial demise and need for a tax-payer bailout.

A book I’ve read that I think has the most complete and thorough analysis of what caused the housing market to have it’s longest positive run only to be followed by a collapse is Thomas Sowells’ “The Housing Boom and Bust“. In his book Mr. Sowell says this about the housing bust and the demise of Fannie Mae and Freddie Mac; “in reality, government agencies not only approved the more lax standards for mortgage loan applicants, government officials were in fact the driving force behind the loosening of mortgage loan requirements.” So is this deja vu or what?

Mr. Sowell goes on to say “the development of lax lending standards, both by banks and by Fannie Mae and Freddie Mac standing behind the banks, came not from a lack of government regulation and oversight, but precisely as a result of government regulation and oversight, directed toward the politically popular goal of more ‘home ownership’ through “affordable housing,” especially for low-income home buyers. These lax lending standards were the foundation for a house of cards that was ready to collapse with a relatively small nudge.”

Correct me if I’m wrong, but it appears to me the government has opened the deck of cards and begun construction again.

There will be a 45 day period for public comments once the proposed rule is published in the Federal Register. I just tried to access the website site and it is down so I don’t know if it’s published yet but will check again and update this post with info on how to comment on the rule if you like.


US Home Prices Fall In First Quarter; St Louis Home Prices Rise

Dennis Norman

Dennis Norman

Today the S&P/Case-Shiller Index report for the first quarter of 2010 was released showing that the U.S. National Home Price Index fell 3.2 percent in the first quarter of 2010, but remains above it’s level from a year-earlier.

In March, 13 of the 20 MSA’s covered by the Case-Shiller report, as well as both the 10-city and 20-city composites, were down for the month however both the composites as well as 10 of the 20 MSA’s showed year-over-year gains. The report cites the end of the tax incentives and the increasing foreclosure rate as reasons the housing market is seeing some “renewed weakness“.


Other highlights from the report –

  • The S&P/Case-Shiller U.S. National Home Price Index for first quarter 2010 is up 2.0 percent from the first quarter of 2009.
  • In March the 10-City Composite was up 3.1 percent from the first quarter of 2009, and the 20-City Composite was up 2.3 percent for the same period.
    • These two indices are reported monthly and have seen improvements in their annual rates of return every month for the past year.

“The housing market may be in better shape than this time last year; but, when you look at recent trends there are signs of some renewed weakening in home prices,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “In the past several months we have seen some relatively weak reports across many of the markets we cover. Thirteen MSAs and the two Composites saw their prices drop in March over February. Boston was flat. The National Composite fell by 3.2% compared to the previous quarter and the two Composites are down for the sixth consecutive month.

“While year-over-year results for the National Composite, 18 of the 20 MSAs and the two Composites improved, the most recent monthly data are not as encouraging. It is especially disappointing that the improvement we saw in sales and starts in March did not find its way to home prices. Now that the tax incentive ended on April 30th, we don’t expect to see a boost in relative demand.

case-shiller-march-2010-metrosFHFA Shows Lower Home Prices in First Quarter Also:

The Federal Housing Finance Agency (FHFA) released their report on first quarter home prices today as well. The FHFA report data and methodology differs from NAR and Case-Shiller, in that the FHFA home price index is based only on the sale prices of homes that are financed with a conforming loan (by Fannie Mae and Freddie Mac’s standards).

The FHFA report for the first quarter of 2010 shows home prices fell 1.9 percent from the quarter before, so not terribly far off from the 3.2 percent decline the Case-Shiller report showed. In contrast to the Case-Shiller report however, the FHFA report showed March’s home prices rose 0.3 percent from February. Also, the FHFA report shows home prices for this quarter fell 3.1 percent from a year ago.


St. Louis Home Prices Doing Better:

For the St. Louis metro and surrounding areas, the median home price for the quarter ended April 30, 2010 was $130,000 an increase of 1.6 percent from the prior quarter’s median price of $128,000 and an increase of 8.3 percent from a year ago when the median home price was $120,000.  In case you are wondering, the median home price for the St. Louis area has dropped 3.0 percent in the past six years.


Median Home Prices in St. Louis Metro and Surrounding Areas for Past Six Years - Source: Mid America Regional Information Systems (MARIS)



Comparison of St. Louis Median Home Prices to Prior Periods - Source: Mid America Regional Information Systems (MARIS)


Where are home prices headed?

As we are frequently reminded, “all real estate is local”, so there will be markets that do better than others, but in general I think we are in store for soft home prices for a while. I think after the “sugar-rush” of the tax credit incentive wears off as the deals close over the next couple of months, and the next wave of foreclosures hit the market we will see prices regress again in many markets, enough so to bring overall home prices in the US down modestly in the coming months.