Home sellers say new appraisal rules make deals harder

BOCA RATON, Fla. – June 18, 2009 – New rules to safeguard the integrity of home appraisals are complicating the deals they’re supposed to protect.Real estate agents, mortgage brokers and buyers, as well as homeowners who want to refinance their loans, are feeling the effects of rules designed to prevent inflationary appraisals that helped fuel the housing boom.“The intentions were good, but the execution was very poor,” said Louis Spagnuolo, vice president of mortgage banking for WCS Lending in Boca Raton.Since May 1, home appraisals must be ordered at an arm’s length, often through a national management company. Gone are the days when a mortgage broker or lender could hire a familiar appraiser to close a deal. Now, communication between the appraiser and real estate agents is discouraged.South Florida real estate professionals and their clients say the rules contribute to low appraisals, which jeopardize home sales and refinancing applications. They’re worried that the recent uptick in sales could slow as a result.Chuck Luciano of Keller Williams Realty recently represented a client who agreed to sell a five-bedroom Boca Raton home for $1.085 million. An appraiser from Miami estimated the value at $1.025 million.“The seller didn’t want to drop the price, and the buyer said, ‘Why should I pay more than the bank says it’s worth?’” Luciano said. “I lost the deal.”The new rules were proposed by New York Attorney General Andrew Cuomo, who pushed for the standards after spending more than a year investigating industry appraisal practices. They govern only loans that will be sold to Fannie Mae and Freddie Mac, government run mortgage companies that buy most of the nation’s home loans, and not loans guaranteed by the FHA or VA.One problem, real estate agents and mortgage brokers say, is that the management companies assign appraisers who don’t know the area and lose experienced appraisers by taking a large percentage of the fees.Another common complaint: appraisers value properties on the low end to appease lenders, which are scrutinizing appraisals now after suffering large loan losses in recent years.Bill Burton of Boca Raton was trying to refinance into a loan with a 4.75 percent interest rate. Burton has a high credit score and lives in an upscale development. But his Deerfield Beach mortgage broker said the bank turned him down after insisting that the appraiser include in his report two sales from a less-desirable community nearby.“I can’t fathom not being approved,” Burton said. “It’s a disgrace.”But appraisers and the management companies blame the flood of foreclosures and short sales for skewing the value estimates downward.Mortgage brokers and real estate agents are upset because they’ve lost control of appraisals, said Dan Morden, an appraiser in Broward and Palm Beach counties. “That’s a bitter pill for them,” Morden said.Two management companies that do business in South Florida say the complaints are unfounded.Charles Ware of Elite Appraisal Management in Michigan said his firm grades appraisers and assigns them to nearby properties. Valuation Logistics in Oregon typically keeps $25 of the average $450 appraisal fee, chief executive Scott Olson said.“Our appraisers are getting almost all of their money,” Olson said.The livelihood of real estate agents and mortgage brokers depends on sales, said Guy Cecala, publisher of the Inside Mortgage Finance newsletter. Changes that appear to stand in the way of that are sure to draw criticism.Regardless, more conservative appraisals likely are here to stay, he said.“It’s a political reality.”Copyright © 2009 Sun Sentinel, Fort Lauderdale, Fla., Paul Owers. Distributed by McClatchy-Tribune Information Services.

Consumer agency wants to revamp lending

WASHINGTON – June 18, 2009 – A new consumer protection agency announced Tuesday by the Obama administration would overhaul current U.S. mortgage lending practices and boost oversight of the U.S. financial system. The administration hopes to avoid financial meltdowns in the future similar to the one that happened recently in the mortgage industry.Following the president’s proposal, the National Association of Realtors® (NAR) announced its support for tighter regulations. “Rebuilding consumer trust in the various markets is important to an economic recovery, and Obama’s proposed Consumer Financial Protection Agency offers the potential to regulate and protect consumers from fraud, predatory lending and other deceptive practices,” says NAR President Charles McMillan. “We look forward to working with Congress and the administration to shape such an organization.”According to a fact sheet distributed by administration officials, the agency would require lenders to offer mortgages with simple terms along with more complex loan products. It would require mortgage brokers to present homebuyers with the best available mortgage loans and ensure that borrowers could afford them. It would also create a ban on prepayment penalties and “yield spread premiums,” which provide an incentive for brokers to steer borrowers to more expensive loans.The proposal includes other elements to create oversight of the financial markets. Rules would apply nationwide to all lenders, although state laws could make the rules tougher.“NAR also appreciates elements of the proposal that will strengthen the national policy against mixing banking and commercial activities,” says McMillan. “This safeguard is in the best interest of consumers and the nation’s economy.”McMillan admits that it’s a big change. “Regulatory reform will be a monumental undertaking,” he says. “NAR looks forward to working with our members, Congress and the administration to craft a final product that allows for efficient, competitive and innovative markets, while providing consumers the protection they need and deserve.”The Mortgage Bankers Association is less unenthusiastic about the proposal. “This seems to be redundant of the current regulatory regime,” says Steve O’Connor, senior vice president for government affairs at the Mortgage Bankers Association. “We see the risk of duplicating efforts, of having overlapping standards and creating confusion in the marketplace. © 2009 FLORIDA ASSOCIATION OF REALTORS®

High court sides with Hometown Democracy on petitions

TALLAHASSEE, Fla. – June 18, 2009 – In a legal victory for Florida Hometown Democracy, the Florida Supreme Court struck down a state law allowing voters to take back their signatures on proposed constitutional amendment petitions, the Associated Press reported late Wednesday. By a 4-2 vote, the high court upheld a lower court ruling in favor of Hometown Democracy, which is seeking a constitutional amendment that requires voters to approve proposed changes to local comprehensive plans. Earlier this month, Hometown Democracy, which challenged the signature revocation law, announced it had enough verified signatures to qualify for the 2010 ballot. The Secretary of State’s office, however, has yet to certify the ballot item as it awaited word from the state’s highest court.“We anticipated that Hometown Democracy would get their signatures, so we have been planning as if the amendment is already on the ballot,” says John Sebree, vice president of public policy for the Florida Association of Realtors® (FAR). “When we explain to Realtors and others how much this amendment would cost their local governments and property owners, they realize it is not what its authors claim it to be.”FAR is part of Floridians for Smart Growth (http://www.florida2010.org), a coalition of 130 business groups and local governments that supports a statewide campaign against the anti-growth Hometown Democracy amendment. © 2009 FLORIDA ASSOCIATION OF REALTORS®

NAR: FHA’s expanded market share must be supported

WASHINGTON – June 19, 2009 – Without the Federal Housing Administration’s (FHA) mortgage insurance program, a large portion of today’s homebuyers would be unable to realize their dreams of homeownership. The National Association of Realtors® (NAR) urged Congress today to invest resources that will ensure FHA’s continued role in stabilizing housing to stimulate the nation’s economy.FHA’s market share has grown from less than 3 percent to more than 25 percent in a short period of time. NAR submitted testimony to the House Financial Services Subcommittee expressing support for increased FHA staffing and resources to keep up with the rising demand.“As the leading advocate for homeownership, NAR strongly supports FHA’s single- and multifamily mortgage insurance programs, and we have worked diligently with Congress to fashion housing policies that ensure federal housing programs meet their mission responsibly and efficiently,” said NAR President Charles McMillan. “FHA is now the primary source of safe, affordable mortgage financing for American families. To keep up with increasing demand, FHA must expand its capabilities – but FHA has not yet received the additional staffing and other resources commensurate with its expanded role in financing mortgages.”Realtors have advocated strengthening oversight of FHA and preventing fraud in the agency and other U.S. Housing and Urban Development (HUD) programs for several years. Despite voiced concerns about FHA’s soundness and oversight, studies show that FHA remains financially sound and should remain so in the coming years. The FHA-approved group of lenders maintains strict oversight of loan originators.“Since FHA has been underinvested in for a number of years, we hope Congress will act now to provide them with resources to increase staffing and invest in technological improvements,” McMillan said. “We believe provisions of what the U.S. Senate has proposed regarding FHA loans in S. 896, the Helping Families Save Their Homes Act of 2009, will be a big step in providing the type of necessary oversight now that FHA is such a major force in the market. We look forward to working with Congress and HUD to make sure that FHA continues to offer stable, affordable, safe options for homebuyers across the country.”© 2009 FLORIDA ASSOCIATION OF REALTORS®

Florida’s affordable housing developers sue state

TALLAHASSEE – June 19, 2009 – A legislative mandate to return $190 million to state coffers is landing Florida housing officials in court as disgruntled affordable housing developers sue the agency for backing out on contracts.The Florida Housing Finance Corp. (FHFC) is responding to 11 challenges on plans to cancel agreements worth $52.8 million in state-backed, low-interest loans for rental units, “for-sale” homes, townhouses and apartments.The cases are being prepped for informal negotiations or formal proceedings before the Division of Administrative Hearings. While specific details differ, the petitions charge housing officials with breaching contracts with companies that relied upon the state-backed loans for up to 30 percent of construction costs.The agency is stepping away from the contracts to comply with legislation passed in January requiring it to return $190 million to general revenue to fill a budget gap. The agency made the payment June 1. Unlike typical budget cuts, FHFC was required to dip into funds already committed to spending projects.FHFC officials warned lawmakers in January that such deep cuts would likely result in legal action by developers who were earlier told they had a deal pending final underwriting approval. Instead, lawmakers decided to ax the program, justifying the move, in part, by saying the state’s rapidly rising foreclosure rate would make housing more affordable.“We begged them to say where they wanted the money to come from,” says Wellington Meffert, FHFC general counsel. “I think some thought they were doing us a favor by leaving the decision up to the agency. They weren’t.”Among the list of disgruntled builders is Prime Home Builders, a Hollywood-based construction firm that is suing to retrieve $20 million promised by FHFC for separate projects worth nearly $60 million.Some of the developers have spent hundreds of thousands of dollars and some more than a million to jump through the hoops when they thought they had the agency’s go-ahead, says Jeff Sharkey, a Tallahassee attorney representing some of builders. “They thought they had a deal,” he says.The cases being challenged were funded under a pilot program created in 2006 to construct affordable rental and ownership housing for essential public employees in areas of the state where the housing costs are high. In all, the agency axed $84 million for projects to build 1,100 affordable homes and 264 rental units.The State Apartment Incentive Loan Program, which provides low-interest loans for developers who agree to set aside 20 percent of units for low-income tenants, was cut $107 million. Farm worker housing took a $10.4 million hit.Most of the 47 targeted developers withdrew without challenging the decision. Changes in the housing market, a credit crunch and other factors combined to make the projects less viable.The state is expected to argue that it had given only preliminary approval to the developers because the projects had yet to receive approval by underwriters. Officials also contend the Legislature’s decision to rescind money already earmarked was extraordinary, leaving the agency with no alternative.If successful in the administrative hearing process, developers would likely still have to go to circuit court and win to get any money back. The agency could be on the hook for legal fees, but only if the hearing officer determines its case was especially weak. Regardless of the outcome, Sharkey said the action will cause some developers to think twice before working with the state agency charged with housing Florida’s less affluent residents who provide essential services to the state.“Unfortunately this has wounded the Housing Finance Corp, which has a stellar record,” Sharkey says.Source: News Service of Florida

Can buying cheap foreclosures make you rich?

ORLANDO, Fla. – June 19, 2009 – Speculators are buying up an uncounted but certainly significant percentage of homes for sale in cities where the meltdown hit hardest.Homes.com reports a 30- to 50-percent year-over-year increase in home searches in foreclosure-heavy states, including California, Michigan and Florida. In these states, helping long-distance investors find and close on properties has become a burgeoning real estate specialty.The investors run the gamut from international speculators seeking a house or two to venture capital firms that buy bundles of homes for 25 cents on the dollar — most in need of renovation and some with substantial tax liens.Will these investments lead to riches? Possibly, if housing prices go back up and if investors are able to fix up and rent the properties out while they wait to sell, experts say.Source: Smart Money, Anne Kadet (06/01/2009)© Copyright 2009 INFORMATION, INC. Bethesda, MD

Mortgage rates fall from 7-month high

WASHINGTON – June 19, 2009 – Rates for 30-year home loans fell back this week after soaring to the highest level in seven months a week earlier.The average rate for a 30-year fixed mortgage was 5.38 percent this week, down from 5.59 percent a week earlier, mortgage company Freddie Mac said.Rates had risen for three consecutive weeks after yields on long-term government debt, which are closely tied to mortgages rates, had been climbing as investors worried that the huge surplus of government debt hitting the market could trigger inflation.But data released Wednesday suggested that inflation remains largely in check, and the yield on the 10-year Treasury note has fallen back from an 8-month high of 4.01 percent reached last week.Though there are signs that the troubled U.S. housing market is beginning to stabilize, higher rates could threaten or slow down any recovery, since borrowers would be able to borrow less money and might decide to hold off on their purchases.The three-week run-up in rates, “is starting to slow homebuyer demand, at least temporarily,” Frank Nothaft, Freddie Mac’s chief economist, said in a statement.Mortgage applications for home purchases fell 3.5 percent for the week ending June 12, according to the Mortgage Bankers Association, while refinancing applications were down 23 percent from a week earlier.Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.The average rate on a 15-year fixed-rate mortgage fell to 4.89 percent, down from 5.06 percent last week, according to Freddie Mac.Rates on five-year, adjustable-rate mortgages averaged 4.97 percent, down from 5.17 percent last week. Rates on one-year, adjustable-rate mortgages fell to 4.95 percent from 5.04 percent.The rates do not include add-on fees known as points. The nationwide fee averaged 0.7 point last week for 30-year and 15-year mortgages. Fees averaged 0.6 point for five-year and one-year adjustable rate loans.Copyright © 2009 The Associated Press, Alan Zibel (AP Real Estate Writer). All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Home insurers deny Chinese drywall claims

Home insurers deny Chinese drywall claims

PALMETTO, Fla. – June 10, 2009 – Like others with Chinese-made drywall in their homes, Joe and Brittany Baker sought relief from their homeowners insurance company.And, like others, the Bakers were turned down. State Farm denied the Palmetto couple’s claim, saying their policy doesn’t cover damages allegedly caused by Chinese drywall in their home.That’s because homeowner policies in Florida typically contain provisions that exclude coverage for damages caused by pollution and construction defects, said Ron Kammer, a Miami attorney who often represents insurers.Darren Inverso, a Sarasota attorney who has filed a class-action lawsuit on behalf of a Lakewood Ranch homeowner, agreed. “They’re not insuring that you received a good house,” he said.That has become a common response from property and casualty insurers faced with drywall-related claims, homeowners and attorneys involved in the unfolding issue said Tuesday.“It’s across the board,” Inverso said.It’s unknown just how many such claims have been filed, and denied, since the drywall issue surfaced last year. But more than 430 Florida homeowners, including 33 from Manatee, have complained to state health officials that the drywall emits noxious odors, corrodes air-conditioner parts and causes respiratory problems.The issue potentially could affect more than 100,000 U.S. homes including more than 30,000 in Florida, according to some estimates.“Our member insurers are seeing the issue in various states, states with high humidity, and it’s usually not covered,” said Julie Pulliam, spokeswoman for the American Insurance Association.She said the industry group did not have statistics on how many drywall-related claims have been filed. The insurance industry’s response should be no surprise, said Kammer, who sat on a panel that addressed insurance issues during a recent drywall litigation conference.“All three of us (on the panel) agreed that it was unlikely that homeowner insurers would assist owners of homes impacted by Chinese drywall,” he said.Still, Inverso said he recommends filing homeowner claims so insurers are put on notice that the home contains Chinese-made drywall.Kammer said homeowners might have better luck filing claims under the builder’s, drywall supplier’s or drywall manufacturer’s commercial general-liability policy. But whether that works will depend on the policy’s language, which can vary greatly, he said.The Bakers, who live in the Carpentras of the Villages of Avignon subdivision, have not done that yet, saying they’re mulling their options. A State Farm spokeswoman could not be reached Tuesday for comment.Copyright © 2009 The Bradenton Herald, Fla., Duane Marsteller. Distributed by McClatchy-Tribune Information Services.

New index foresees recession’s end

New index foresees recession’s end

McLEAN, Va. – June 11, 2009 – The recession likely will end in September and be followed by a mild recovery, according to the new USA TODAY/IHS Global Insight economic outlook index.But despite Federal Reserve Chairman Ben Bernanke’s recent talk of the economy’s “green shoots,” few are confident prosperity is near. And the Fed’s “beige book” report released Wednesday, a look at the nation’s regional economies, says that the economy remained generally weak in April and May.“We’re two to three months away from an upturn,” says Nariman Behravesh, chief economist for IHS Global Insight.David Wyss, chief economist for Standard and Poor’s, agrees: “We see a bottom in the fall, but there’s a lot of risk attached to that.”The economic outlook index used to predict the recession’s end is a composite of 11 forward-looking economic and financial indicators that predicts future GDP growth, adjusted for inflation. For each indicator, it uses an average of the latest three months relative to an average over the past year.Seven of the index indicators were positive in the May report. Three positive signs:• The interest rate yield curve is steepening. Yields on Treasury securities typically rise from the shorter-term Treasuries to longer-term ones. When the percentage-point difference between long-term and short-term Treasury securities yields increases, it’s a sign that demand for credit is growing – or that the Federal Reserve is keeping short-term rates low. Either way, a steepening yield curve often portends future economic growth.• Big-ticket item orders are up. In April, orders for non-defense capital goods – durable items used to make roads, buildings or machinery – were up slightly. Orders are still far below year-ago levels, but they are no longer falling dramatically.• We’re officially in a bull market. Because investors try to forecast corporate earnings 12 to 18 months in advance, stock prices have a very good record of predicting future economic activity. The stock market rose strongly in April and May.One worry: another financial crisis triggered by the collapse of a major financial institution. Wyss says he’s less worried about U.S. banks than he is about European ones, which have been struggling with loan losses in Eastern Europe.Because of lingering credit woes for companies, Behravesh thinks the new economic recovery will be sluggish.“Consumers continue to be cautious,” he says. “We’re not out of the woods yet.”Copyright © 2009 USA TODAY. All rights reserved.

Foreclosures fall 6 percent in May from April

Foreclosures fall 6 percent in May from April

WASHINGTON – June 11, 2009 – The number of U.S. households on the verge of losing their homes dipped in May from April, and the annual increase was the smallest in three years.But as layoffs, rather than risky mortgages, become the main reason that borrowers default on their home loans, foreclosures likely will remain elevated this year and into 2010. Many economists expect unemployment, now at 9.4 percent nationwide, to rise as high as 10 percent, and some project it will exceed the post-World War II record of 10.8 percent.Foreclosure filings fell 6 percent in May from April, according to RealtyTrac Inc. More than 321,000 households received at least one foreclosure-related notice last month – 18 percent more than a year earlier – but the smallest annual gain since June 2006.Despite the drop from April, it was the third-highest monthly rate since Irvine, Calif.-based RealtyTrac began its report in January 2005, and the third straight month with more than 300,000 households receiving a foreclosure filing.One in every 398 U.S. homes received a foreclosure filing last month, according to the foreclosure listing firm’s report.The mortgage industry has resumed cracking down on delinquent borrowers after foreclosures were temporarily halted by mortgage finance companies Fannie Mae and Freddie Mac and other lenders.“It would not be a huge surprise to see the numbers level off a little bit at this point,” said Rick Sharga, RealtyTrac’s senior vice president for marketing.Banks repossessed about 65,000 homes in May, up from 64,000 in April, due to big increases in several states including Michigan, Arizona and Nevada.The Obama administration announced a plan in March to provide $50 billion from the financial industry rescue fund as an incentive for the mortgage industry to modify loans at lower monthly payments.But the effectiveness of the relief plan remains unclear, with questions lingering about how much the lending industry will cooperate. Many housing counselors say it hasn’t made much of a difference so far.After banks take over foreclosed homes, they usually put them up for sale at deep discounts, pulling down prices for other sellers. Nationwide, sales of foreclosures and other distressed properties made up about 45 percent of the market in April, according to the National Association of Realtors.The supply of new foreclosures had diminished in recent months as banks held off on taking back properties, but it’s starting to surge again, said Gary Kent, a San Diego real estate broker who focuses on the foreclosure market.“Everything I’ve got that’s priced right is just flying off the shelves,” he said.On a state-by-state basis, Nevada had the nation’s highest foreclosure rate in May with one every 64 households receiving a filing. California took the No. 2 slot previously occupied by Florida. California’s rate was one in every 144 households.In Florida, one in every 148 households received a foreclosure filing. Rounding out the top 10 were Arizona, Utah, Michigan, Georgia, Colorado, Idaho and Ohio.Among large cities, Las Vegas led the way with one in every 54 households receiving a filing. Four California metropolitan areas – Stockton, Modesto, Riverside-San Bernardino and Merced – were next, followed by Cape Coral-Fort Myers, Fla.; Bakersfield, Calif.; Orlando, Fla.; Vallejo-Fairfield, Calif.; and Miami. Copyright © 2009 The Associated Press, Alan Zibel (AP Real Estate Writer). All rights reserved. This material may not be published, broadcast, rewritten or redistributed.