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California REALTORS® hailed the Federal Housing Finance Agency’s announcement this week that government-sponsored enterprises Fannie Mae and Freddie Mac will lower down payments to as little as 3 percent for first-time home buyers and permit refinancing borrowers to reduce equity to 3 percent to cover closing costs.

The FHFA decision to lower down payments is in line with its effort to boost the real estate market and expand the pool of first-time home buyers who have been kept in the sidelines even as the housing market has been on the path to recovery. “The new lending guidelines will enable creditworthy borrowers who can afford a mortgage, but lack the resources to pay a substantial down payment plus closing costs, to get a mortgage with 3 percent down,” said FHFA Director Melvin L Watt in a statement released on Monday.

David Tonna, president of the Silicon Valley Association of REALTORS®, applauded the FHFA’s decision to expand access to credit to first-time home buyers. “Despite an improving job market and low interest rates, the share of first-time home buyers in 2014 was the lowest in nearly three decades,” said David Tonna, president of the Silicon Valley Association of REALTORS.

Tonna said according to the 2014 National Association of REALTORS® Profile of Home Buyers and Sellers, the share of first-time home buyers dropped from 38 percent in 2013 to just 33 percent this year. This represents the lowest share since 1987, when the first-time home buyer share was at 30 percent.

“We commend the FHFA’s commitment to expand homeownership and are confident that the underwriting guidelines put in place will mitigate risk,” said Tonna.

Borrowers still need to meet strict criteria under the new programs. Only borrowers who haven’t owned a primary residence within the last three years will be eligible for Fannie Mae’s 3 percent down payment program, which starts Dec. 13. The Freddie Mac program, which will begin in March, is only for borrowers who have never owned a home, those with moderate incomes or are in underserved areas.

Borrowers for both programs will be required to buy private mortgage insurance, provide complete documentation of their income, assets and job status. Borrowers also need a credit score of at least 620 to qualify and are required to receive homeownership counseling.

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Fannie Mae and Freddie Mac will not be reducing loan limits, the new director of the Federal Housing Finance Agency (FHFA) announced last week. FHFA Director Mel Watt’s decision not to direct the government-sponsored enterprises (GSEs) to lower the limits for home loans that they back is a major shift in direction of his predecessor, who favored winding down their role in mortgage finance.

The conforming loan limit will remain at $417,000 in most areas and at $625,500 in high-cost areas like Santa Clara and San Mateo counties. Watt also said the agency was taking steps to loosen mortgage credit by easing standards on when banks could be forced to buy back some loans sold to Fannie and Freddie.

A conforming loan limit is the maximum size for loans that can be purchased by government-sponsored enterprises Fannie Mae or Freddie Mac. Mortgages purchased by Fannie Mae and Freddie Mac are generally less expensive than the larger jumbo loans because the government absorbs the cost of default.

Watt’s announcement is good news, especially for California home buyers, said David Tonna, president of the Silicon Valley Association of REALTORS®. “If the FHFA were to lower the loan limits, it would force home buyers to pay more for their mortgages and undermine home ownership affordability. High-cost areas like Silicon Valley are already experiencing shrinking housing affordability,” said Tonna.

The California Association of REALTORS® (C.A.R.) immediately commended the new FHFA director’s announcement. “C.A.R. commends FHFA Director Melvin Watt for his announcement that the FHFA will not reduce loan limits on loans eligible for purchase by Fannie Mae and Freddie Mac,” said C.A.R. President Kevin Brown. “Lower loan limits would have had an adverse effect in many parts of the country, but especially here in California where rebounding home prices and decreasing home affordability would hamper mortgage activity and impact the housing recovery.”

The Silicon Valley Association of REALTORS® informed its members and their clients that Fannie Mae and Freddie Mac will postpone plans to increase mortgage guarantee fees. The news was recently announced by Rep. Mel Watt, D-N.C, incoming director of the Federal Housing Finance Agency, which oversees the government-sponsored enterprises (GSEs). Watt said he will delay the planned increases in mortgage fees until he has time to review the rationale behind it.

Fannie Mae and Freddie Mac said last month that they intend to charge more to lenders who guarantee loans for borrowers with mid-range-or-below credit scores, as well as borrowers who don’t meet certain down payment guidelines. The fees were set to take effect in March and April of 2014.

Critics in the mortgage and housing industry had argued that the fees were too high. Fee hikes on lenders are usually passed on to borrowers via higher interest rates

California REALTORS® this week strongly objected to the bulk foreclosure sale program and called for a change of leadership at the Federal Housing Finance Agency (FHFA), the agency which initiated the pilot program and oversees mortgage giants Fannie Mae and Freddie Mac.

The California Association of REALTORS® (C.A.R.) released a statement on Monday objecting to the recent REO bulk sale transaction between Fannie Mae, the FHFA and Colony Capital. Colony Capital, a Santa Monica real estate investment company, has purchased 970 foreclosed homes in California, Arizona and Nevada at auction from Fannie Mae for $176 million.

C.A.R. president LeFrancis Arnold called the recent purchase of California properties “another gift to Wall Street at the expense of taxpayers.”

According to the C.A.R. statement, “The implementation of the ill-conceived program highlights the failure of FHFA to appropriately address this issue despite C.A.R. and others outlining alternatives. The botched execution of the REO bulk sales, and Home Affordable Foreclosure Alternatives (HAFA) and Home Affordable Refinance Program (HARP) under FHFA’s oversight and leadership has demonstrated a lack of understanding of the housing market. Given these and other missteps, C.A.R. believes it is time for a change in leadership at the FHFA.”

The bulk foreclosure sale is a pilot program of the FHFA intended to help clear the large numbers of foreclosed homes on the books of Fannie Mae and Freddie Mac. The National Association of REALTORS® has objected to the program. California and Florida REALTORS® have also deemed the program unnecessary since housing inventory in their markets is now at an all-time low, prices are rising, and demand for homes is up.

C.A.R. data indicates the median home price in the Inland Empire is up 15 percent from $172,000 in February 2012 to $198,270 in September, and unsold inventory is down from 5.3 months to 3.8 months during the same period. The median home price in Los Angeles has risen 37 percent from $272,920 in February 2012 to $373,020 in September, and inventory is down from 5.7 months to 3.7 months.

Although Silicon Valley properties are not  included in the bulk sales program, Suzanne Yost, president of the Silicon Valley Association of REALTORS®, said the region is also experiencing a shortage of inventory. She noted the housing market has greatly improved statewide and buyers are having a difficult time getting into the market because there are not enough homes to meet demand.

“By going forward with bulk sales of foreclosed properties, investors will be buying homes and holding them until prices appreciate further. These are homes that are affordable now for first-time buyers but may not be when prices have gone up. It is sad that FHFA is choosing to support investors instead of people that want a home to own and live in,” said Yost.

Along with the 970 properties in California, Arizona and Nevada bought by Colony Capital, the first round of bulk single-family home sales included 699 Florida properties sold to Pacifica Companies LLC and 94 Chicago properties purchased by The Cogsville Group.

The Federal Housing Finance Agency (FHFA) announced on Tuesday that it will align guidelines for Fannie Mae and Freddie Mac short sales and allow lenders and servicers to quickly and more easily qualify borrowers for a short sale. 

The new guidelines issued by Fannie Mae and Freddie Mac to their mortgage servicers will offer a more streamlined approach to the short sale process by consolidating existing short sales programs into one standard short sale program. The program rules will expand eligibility criteria of borrowers, so homeowners who are current on their mortgage payments, yet suffer from specific hardships, will be able to qualify more quickly for a short sale.

Effective Nov. 1, homeowners with a Fannie Mae or Freddie Mac mortgage will be allowed to sell their home in a short sale even if they are currenton their mortgage, if they have an eligible hardship. Servicers will be able to expedite processing a short sale for borrowers with hardships such as death of a borrower or co-borrower, divorce, disability, increase in housing expenses, unemployment, disability, or relocation for a job, without any additional approval from Fannie Mae or Freddie Mac.

“We are pleased with the new guidelines. REALTORS® at the local, state and national level have long advocated for a more streamlined, standardized short sale process. Improving short sale eligibility will allow more families to avoid foreclosure and reduce the negative impact foreclosures have on families and communities,” said Suzanne Yost, president of the Silicon Valley Association of REALTORS®.

Some specific changes include:

  • Eliminates current Fannie Mae and Freddie Mac short sale programs and creates a single standard short sale process for both entities (Fannie and Freddie HAFA programs will expire at the end of the year).
  • Enables servicers to quickly and easily qualify certain borrowers who are current on their mortgages for short sales without waiting for an approval from Fannie Mae or Freddie Mac
  • Offers special treatment for military personnel with Permanent Change of Station (PCS) orders.
  • Standardizes and clarifies foreclosure suspensions on a property with an approved short sale.
  • May pay borrowers up to $3,000 in relocation assistance.
  • Fannie Mae and Freddie Mac will offer up to $6,000 to subordinate lien holders to expedite a short sale.

Additionally, FHFA clarified that a borrower experiencing a hardship must wait at least two years before becoming eligible for a Fannie Mae or Freddie Mac loan. These changes follow FHFA’s announcement in June that established strict timelines for servicers to respond to short sales within 30 days of receipt of a short sale offer, provide weekly status updates to the borrower, and communicate a final decision to the borrower within 60 days of receipt of the offer.

REALTORS® applaud the recent move by California Congressional members opposing the implementation of REO sales in California. Implementing the Federal Housing Finance Agency (FHFA)’s “REO Initiative” pilot program in California would negatively impact the state’s housing market and increase losses to taxpayers and the GSEs, according to California’s REALTORS® and legislators.

Congressman Gary Miller (R-Brea), along with 18 other members of California’s congressional delegation, issued a letter last week to Edward J. DeMarco, acting director of the Federal Housing Finance Agency (FHFA), urging DeMarco to refrain from implementing the agency’s “REO Initiative” pilot program in California because it would negatively impact California’s housing market and raise costs for taxpayers. The REO Initiative pilot program calls for the sale of more than 600 Fannie Mae-owned foreclosed homes in Los Angeles and Riverside counties to institutional investors. 

REALTORS® believe the pilot program is not beneficial to the California market because housing inventory is extremely low and demand is high. Home buyers in most of California’s markets are experiencing multiple offers, even for distressed and foreclosed properties. According to data from the California Association of REALTORS®, sales of bank-owned homes are closing in an average of less than 60 days – and often above the list price – without government intervention.

“We commend the California congressional delegation’s letter to Mr. DeMarco,” said LeFrancis Arnold, C.A.R. president. “Carrying out this plan in California would potentially further delay a housing recovery and, ultimately, result in greater losses for the taxpayer.”

The latest National Association of REALTORS® report on second homes indicates investment home purchases represented nearly one-third of all existing-home sales last year. NAR says this robust investment activity underscores the importance of limiting the government’s use of real estate owned (REO) bulk sales. The 2012 NAR Investment and Vacation Home Survey shows investment-home sales surged an extraordinary 64.5 percent to 1.23 million last year from 749,000 in 2010.

“Silicon Valley is experiencing a high demand for homes, resulting in multiple offers due to the very low inventory,” said Silicon Valley Association of REALTORS® President Suzanne Yost. “We believe policymakers and lenders should instead focus on expanding the availability of financing for qualified home buyers and investors and intensify pre-foreclosure efforts to keep families in their homes.”

The 19 California Congressional members who backed the letter include Gary Miller, Jerry Lewis, Ken Calvert, Jeff Denham, Elton Gallegly, Dana Rohrabacher, Buck McKeon, Duncan Hunter, Brian Bilbray, Mary Bono Mack, Susan Davis, Brad Sherman, Joe Baca, Grace Napolitano, Judy Chu, Jim Costa, Adam Schiff, Barbara Lee, and Howard Berman.

The National Association of REALTORS® and SILVAR applaud the Federal Housing Finance Agency’s (FHFA) final rule limiting Fannie Mae, Freddie Mac and the Federal Home Loan Banks from dealing with mortgages on properties encumbered by certain types of private transfer fee covenants and in certain related securities. Transfer fees are contractual arrangements where an owner pays a fixed amount or a percentage of the sales price when transferring the property.

NAR fully supports FHFA’s decision to ban private transfer fees, which it believes increase the cost of home ownership, provide no benefit to home buyers, and do little more than generate revenue for developers or investors. NAR has long been vocal in its opposition to private transfer fees. There is virtually no oversight on where or how the fee proceeds can be spent, on how long a private transfer fee may be imposed. It also often places an inappropriate delay on the transfer of property.

The final rule excludes private transfer fees paid to homeowner associations, condominiums, cooperatives, and certain tax-exempt organizations that use private transfer fee proceeds to benefit the property. Fees that do not directly benefit the property are subject to the rule, and would disqualify mortgages on the property from being sold to Fannie Mae or Freddie Mac, or used as collateral for Federal Home Loan Bank advances. With limited exceptions, the rule applies only prospectively to private transfer fee covenants created on or after the date of publication of the proposed rule on February 8, 2011. Covenants created before that date, as well as covenants created after that date pursuant to certain agreements entered into before that date, would be exempted from the rule.

G-Fee hikes could mean $15 a month more.

The law signed by President Obama two weeks ago to extend the payroll tax cut and maintain Medicare payments and unemployment benefits uses increases in the fees charged by Fannie Mae and Freddie Mac to guarantee mortgages to help offset its costs. The law also uses funds from premiums charged for insurance on FHA loans. As a result, the Federal Housing Finance Agency has directed Fannie Mae and Freddie Mac to increase their guarantee fees effective April 1 and will remain in effect through September 30, 2021.

The National Association of REALTORS® (NAR) opposed the increase in fees to pay for non-housing-related purposes. Lenders who choose to pass this increase on to borrowers will likely increase the rate offered to a borrower by .1 percent sometime before April 1. Analysts estimate the increase in cost over 30 years to be between $4,000 and $5,400 on a $200,000 loan, or $11-15 per month.

FHFA’s Statement

NAR’s Letter Opposing the Increase

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