FHA Changes Mortgage Insurance Premium (MIP) Policies

The US Department of Housing and Urban Development (FHA) has decided to change its policies as it relates to the length and amount of Mortgage Insurance a borrower must pay for holding a mortgage. This new policy is effective April 1, 2013 for Mortgage Insurance Premium increases and June 3, 2013 for length of the Mortgage Insurance one has to pay.

Now there are benefits of an FHA loan: Minimal down payment of 3.5% (Which can be gifted), underwriting guidelines that are not too strict, and lower fico scores to qualify (This can depend on the lender). However, the idea of paying for mortgage insurance for a minimum of 11 years may deter many ready and willing first-time home buyers. The 11 years is a minimum as long as you have 10% as a down payment. For anything less, you will be paying the mortgage insurance until the end of the mortgage term.

Many first-time buyers are going to make the decision of holding off until they can save a higher down payment or take advantage of low real estate values and eventually refinance (if it makes sense) to justify a lower payment. We are in the early stages of an economic recovery and housing has certainly been a topic of discussion in leading the recovery but introducing a more expensive way to procure a loan does not help with one of the country’s biggest markets. For details on the FHA loan changes: http://portal.hud.gov/hudportal/documents/huddoc?id=13-04ml.pdf

Cash Is King.....For Now

As I visited numerous open houses over the weekend, I continue to hear a common recurring theme. There are plenty of cash Buyers! I always tell people, everyone is a Buyer and Seller….it just depends on price and service.

A great deal of properties being purchased are done so by investors. They are taking advantage of low prices coupled with low interest rates that this country has ever seen. Period! Why would you not want to be an investor or a first time home buyer? Do you doubt that inflation is coming? What this has done for the time being is create an opportunity for those that want to seize it. It seems like many investors understand where we are in the economic cycle to have them create a buying frenzy. Now I’m only speaking in generalities, much of the country elsewhere is not necessarily experiencing what we have been in Southern California. This leads us to the Buyers themselves. Traditionally, the more experienced will have cash and as you know, cash has been king. Representing a cash buyer eliminates financing contingencies resulting in a quicker close for all parties. This does not mean that other buyers that need financing are less qualified, although traditional financing does lengthen the process. Traditional financing requires time, appraisals, and underwriting before a loan can be issued. There have been more foreign investors that attract listing agents because foreign nationals circumvent the financing. Countries such as China, Taiwan, Europe and the Middle-East all have been pouring their money into the real estate market as a safe bet. Most banks and lenders require a social security number, credit and employment which foreign nationals may not have making it easier to go with an all cash buyer.

According to David Kim of Carrington Mortgage, “Most cash offers have a 15-day escrow period. We pledge a 25-day loan closing so we are competitive when it comes to quick closings.”

Although cash seems to be the proverbial king, lenders are now making stride to keep pace with shorter closings geared toward the majority of Buyers.

David Kim can be reached at (626) 252-5709 or david.kim@carringtonms.com

California Foreclosures/REO’s Decline By 60%

Last month’s foreclosure and REO filings dropped drastically from the previous month’s numbers. One reason has to do with new legislation going into effect that makes certain bank foreclosure procedures more prohibitive. These news laws that became effective in January have provided homeowners greater protection when dealing with banks in the default process.  There was an estimated 60% decrease in default notices from the prior month.

This is interesting because this data comes after the 2012 holiday season. The overall unemployment is lower than where we were approximately 12 months ago. Typically, the holiday season provides temporary jobs and as the New Year approaches, the majority of the seasonal positions are no longer needed. But the overall trend is positive as California shows signs of less defaults than it has in the previous few years.

Carrington Mortgage Services Offers 25-Day Loan Closings

Carrington Mortgage Services announces 25-Day closings today. In today’s market, the average time for a purchase loan transaction is about 45 days. When direct lenders are able to deliver customer-centric services, everyone benefits. The lending industry will take notice of these service times to compete. Everyone’s game will be elevated or you will see more dissatisfied consumers and potential loss of revenue. Carrington has increased its operational efficiency to commit to 25-day closings.

Click here for the full article: http://finance.yahoo.com/news/carrington-mortgage-services-announces-25-140000176.html

Housing Continues To Fuel US Economy

There are a number of housing factors that are contributing to the boost in our economy. Many cities are now showing an increase in housing prices. Although inventory is not as robust, many Realtors and agents are experiencing multiple offers on their listings. This would indicate a shortage of properties and a surplus of Buyers.

With all that said, you will see more and more real estate companies hiring for agents. Lenders will increase their staffing for loan originators to funders. Contractors and developers will hire additional workers. Most businesses that rely on the real estate cycle will also see an increase in production. This includes lumber yards, transportation, business services, etc.

I have personally seen more and more new construction in areas where building has generally been non-existent. With declines in delinquencies, defaults and foreclosures this can only mean that the housing industry and related industries will experience a boost in business.