Starting Wednesday, Florida hopes to stoke its real-estate market by becoming one of the few states to offer $8,000 in down-payment assistance to qualified homebuyers so they can benefit upfront from a new federal tax credit.The state Legislature set aside $30 million to create the Florida Homebuyer Opportunity Program, aimed at first-time buyers and others who have not owned a home for at least the past three years. To qualify, an individual cannot earn more than $75,000 a year, while couples can't earn more than $150,000."Here in Florida, rather than qualified buyers waiting to get the tax credit on the tail end of the process, in the form of a credit after they have filed the tax returns, it will allow them to get it upfront and let them use it for down-payment assistance and fees," said David Hart, vice president of legislative and government affairs for the Florida Home Builders Association. He estimated that about five states are taking a similar approach.The state's program takes effect Wednesday, though the money isn't expected to be available until later in July or August. The funds are being distributed through local government and nonprofit agencies that already provide down-payment help through the State Housing Initiatives Partnership, known as SHIP. Qualified homebuyers are entitled to $8,000 or 10percent of the property's purchase price, whichever is less.
Tightened lending standards are leaving builders and real-estate agents scrambling for new ways to move cash-strapped buyers into homes. One increasingly popular option: an obscure home-loan program offered by the U.S. Department of Agriculture.
Erick Moore used a no-money-down USDA-backed loan to buy this four-bedroom house outside Raleigh, N.C.
When Erick Moore first read about the USDA's Rural Development Guaranteed Loan program, he says he imagined it would be "restricted to some little farmhouse." Instead, the 33-year-old computer programmer moved last month into a four-bedroom, three-bath home in Fuquay-Varina, N.C., 17 miles outside Raleigh. The house sits on nearly one acre and features a brick facade, 10-foot ceilings and hardwood floors.
"I couldn't believe it until we closed," says Mr. Moore, who paid only $1,200 out of pocket to move into the $228,000 home. The seller contributed $5,000 in closing costs, and Mr. Moore rolled the 2% fee charged by the USDA into the loan. Mr. Moore, who owned a home in St. Louis before he relocated to the Raleigh area last year, says a 60% drop in his stock portfolio made it difficult to come up with a down payment. He directed his Realtor to show him only homes that were eligible for the USDA program.
Fueled by buyers like Mr. Moore, volume has nearly doubled for these USDA-backed loans. The department insured $7 billion in loans during the 2008 fiscal year, which ended Sept. 30, up from $3.6 billion the previous year. In October and November, the agency has already insured some $1.7 billion in loans.
That's relatively small when compared with the volume of business handled by the Federal Housing Administration -- which guaranteed $102 billion in new loans during fiscal 2008. But interest in the USDA's development lending program is growing rapidly in response to the nation's credit crunch and as most private lenders have stopped offering loans with no money down.
To be eligible for a USDA-backed loan, a borrower can't have income that exceeds 115% of the median county income, and the loans are restricted to areas with lower population density -- generally towns of no more than 25,000 residents. So while home buyers in big cities aren't eligible for the loans, residents of many of America's fastest-growing towns and exurbs do qualify. The loans that come through the program are made by private lenders, then insured by the government and sold to Ginnie Mae, a federal agency that sells mortgages to investors.
Home builders, many of which have overbuilt properties in these areas, are eagerly promoting the program to sell excess inventory. The USDA program accounted for 40%-50% of sales in October and November for Scottsdale, Ariz.-based home builder Meritage Homes, says John Bargnesi, vice president for sales. "It's one of our main tools right now."
Meritage is advertising a "$500 move in" program to clear inventory in new exurban developments, including the Buckeye and Queen Creek subdivisions outside Phoenix that have been hard hit by foreclosures and falling prices. "If a builder is in one of these geographical areas, they certainly are using it," says Mr. Bargnesi. "We're all in tune with it now."
D.R. Horton Inc., the nation's largest home builder by number of houses built, is promoting the program in sales pitches for a number of new developments outside Austin, Texas. One is named Parkside Condos, a development of 144 new two- and three-bedroom condos priced at $130,000 in Pflugerville. Kastera Homes LLC, a home builder based in Boise, Idaho, is offering to pay closing costs for buyers who use a USDA loan. D.R. Horton and Kastera didn't return calls seeking comment.
The success of the USDA program comes at a time when easy home financing is getting much harder to find. Private lenders have stopped offering loans that require no money down, amid worries that borrowers without equity are more likely to let their homes fall into foreclosure. In October, Congress terminated a popular program that allowed sellers to fund down-payment "gifts" for new home loans backed by the FHA. Next year, the FHA will require a minimum 3.5% down payment on all new loans, up from 3%, and private lenders often require a minimum 5% down payment.
Such restrictions do not apply to loans backed by the USDA, which is best known as the guardian of the nation's food supply. In fact, some buyers can finance 102% of the home price, factoring in a 2% USDA insurance fee meant to cover loan losses. The loans also don't require borrowers to pay for monthly mortgage insurance. That means that USDA loans typically carry lower monthly payments than FHA loans, even in cases when the size of the loan is larger.
Sue Botelho of Northstar Mortgage Group in Destin, Fla., is promoting the USDA loans as part of a "move in with a penny down" program. "The down-payment assistance has gone away. Subprime has gone away," she says. "So now mortgage lenders are pretty aggressive in terms of making people aware of this USDA program."
One of Ms. Botelho's clients, 46-year-old insurance adjustor Alan Sammons, paid nothing to move into a new $270,000 home in the Florida Panhandle in June. He had spent more than a year trying to find a reasonable loan before beginning construction on a custom four-bedroom, 3½-bathroom home in his Crestview, Fla., subdivision, which includes a community swimming pool and lighted tennis courts.
"They're still building homes in here," Mr. Sammons says.
Julie Chapman, a Brunswick, Ga., real-estate agent, says she is listing more properties eligible for the USDA loans -- including homes in the Plantation at Golden Isles, a new subdivision adjacent to a golf course. Many of the properties are selling preconstruction. "That's something you don't see anymore in this market," she says.
New housing developments built on open land that were among the first to experience the downturn could now benefit from the USDA program. "They're showing some signs of recovering," says Michael Orr, a housing analyst based in Mesa, Ariz.
Some question the USDA's practice of allowing no-money-down purchases. "If you have to get a 102% loan, you probably shouldn't be buying a house," says U.S. Sen. Christopher Bond (R., Mo.), who adds that he supports the intent of the programs because it has traditionally been "very difficult" for rural borrowers to buy homes.
USDA officials, for their part, say that concerns about the program's 100% financing aren't warranted because the department has a strong track record and because rural areas are less prone to big increases in home prices. "We guarantee in a very controlled environment," says Philip Stetson, a USDA administrator for the lending program. Because its average loan amount is just $120,000, he says that the program is less susceptible to large-scale losses.
USDA- and FHA-backed loans aren't prone to some of the risks that faced subprime loans because the government-insurance programs offer only fixed loans and require income verification. "We have not seen any direct evidence at this point that 100% financing is leading to greater losses," Mr. Stetson says.
The default rate on USDA loans is slightly better than the rate for FHA-backed loans. Some 11.35% of USDA loans were delinquent in 2008, while 1.4% went into foreclosure, according to the department's statistics. Meanwhile, FHA loans had a 13.6% delinquency rate, while 2.3% went into foreclosure. That compares to a 4.3% delinquency rate and 1.6% foreclosure rate on prime loans, and a 20.0% delinquency rate and 12.9% foreclosure rate on subprime loans, according to the Mortgage Bankers Association.
Unlike the FHA, the USDA programs rely on a fixed appropriation from Congress, which totaled $4.1 billion in the 2008 fiscal year, and new loans can't be made once that allocation is exhausted. The program was able to make nearly $7 billion in loans this year because it received additional funding from other department sources.
But heavy demand for the loans has administrators asking for more money. Officials say that the program will run out of money next month, even though it has been funded through March. "Up until only two years ago, we weren't even using the full amount," says Mr. Stetson. "It has been rather incredible at how it has taken off."
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USDA Rural Development Foreclosures
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What a great time for first time home buyers to purchase a home. You can receive up to an $8000 refund check for purchasing a home. If your normal refund is $1500 and you purchased a home now you would receive a check for $9500 instead. Wow that is enough to furnish it ect.
Per the IRS.gov website, you may qualify to receive this credit if you meet the following qualifications:
"... qualifying taxpayers who buy a home before Dec. 1, 2009, can claim the credit on either their 2008 or 2009 tax returns. They do not have to repay the credit, provided the home remains their main home for 36 months after the purchase date. They can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.
The amount of the credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.
For purposes of the credit, you are considered to be a first-time homebuyer if you, and your spouse if you are married, did not own any other main home during the three-year period ending on the date of purchase."
The credit itself:
CNBC has come up with a new word: "Great Recession".
Nobody, of course, wants to use the "D" word, but the "D" word is exactly what we should be using, because its what we're entering - and in fact are likely already in.
All the commentators like to talk about "monetary policy" and how it "isn't working because the credit markets are dysfunctional."
Nobody mentions that the reason the credit markets are dysfunctional is that credit has been abused by consumers, industry and government alike.
1/3rd of all homes now have mortgages that exceed the value of the house. This didn't happen by accident, it happened due to the collapse in traditional underwriting standards, which once again are:
Nobody wants to go back to reasonable lending standards. Why? Because if you do, you exclude most buyers - not because of the housing price or the "front end" ratio, but because consumers have levered up everywhere else too, including student loans, credit cards and buying a new car every three years.
The hue and cry for such silliness as seller-financed down-payment "assistance" (which ought to be outlawed as intentionally misleading, as it serves to improperly prop up the reported sale price of the house, effectively "laundering" a seller concession) FHA 3.5% "down payments" (1/5th the reasonable requirement) along with other expressions of idiocy such as allowing AUS/TOTAL automated approvals that stretch debt-to-income ratios is proof positive that we're a nation that is stuck in debt up to our necks.
There is no durable and reasonable recovery that can happen until that debt is either paid down or defaulted. Since we continue to refuse to tighten up standards for major capital purchases (including houses and cars) we will continue to march over the cliff, one step at a time, until the transfer of the defaulting and to-be-defaulted debt is transferred to a "government guarantee" reaches a critical mass.
At that point government funding evaporates from external sources and the "job cuts" all happen there, along with forced cuts in government largess programs - whether the administration wants them to or not.
President Obama and Congress simply refuse to deal with reality and his so-called "advisers" are in fact up to their necks in the policies that got us here. As a consequence people like Larry Summers cannot be counted on to provide impartial or even honest analysis, as it is their very policy structures and suggestions from more than ten years ago that got us here in the first place!
Obama is now said to be favoring a "prepackaged" bankruptcy for GM, allowing Chrysler to go under. It would be nice if we would see our President realize that this same mess exists in virtually every corner of our economy, but doing that requires skewering people who he considers "trusted advisers."
It is rather amusing to hear Senators like Mr. Shelby come out and tell us how bankruptcy is "best for the taxpayer" when it comes to GM (true) but they won't say the same thing about Bank America and Citibank. Why not? Fact is, a bankruptcy is the correct solution to too much debt and excess capacity no matter where it is, as it is the formal structure under our capitalist system by which excessive debt (supporting capacity that is in excess of requirements and thus unproductive) is cleared through debt-to-equity cramdowns, real concessions by all stakeholders (forced by a judge) and/or outright defaults.
These same Congressfolk also don't want to repeal the so-called "bankruptcy reform" law of a few years ago that made it nearly-impossible for income-earning Americans to discharge their debts over that same Constitutionally-provided process. Indeed over the years Congress has extended the net of "impossible to discharge" debt ever further like a creeping prickerbush; child support awards, IRS debt and privately-written student loans. More recently for those with above-median incomes all debt became effectively non-dischargable.
Never mind that these very same bankers have effectively secured themselves a pass from prosecution for outright fraud - which they then committed with wild abandon, embezzling trillions in total from citizens, municipalities and pension funds around the world, squirreling it away for their own benefit while chortling at their "bought and paid for" immunity from prosecution thinly disguised as "campaign contributions."
This of course is what the bankers want, but it is precisely backward in relationship to what America needs. If we are to see our debt levels contract from 370% of GDP (up from 350% last year) and not provoke a GDP collapse (which will rocket that ratio higher) we must instead:
In short the solution to insoluble debt is bankruptcy. It is through bankruptcy that we clear that debt from the books, which is a necessary precondition to a re-balancing of the economic output of this nation to its ability to fund consumption with production, not "pulled forward" credit-driven false demand.
The UAW and organized labor in general, long thought to be the "favored" among President Obama and the Democrats through their speeches and claims, in fact were thrown under the bus. It is simply remarkable that the UAW hasn't literally mobilized every labor union in the United States and coalesced their memberships into a march on Washington DC, laying (peaceful!) siege to the city and demanding that the same sort of "tough love" meted out for GM and Chrysler be applied to all the financial concerns that have instead received well north of a trillion dollars of largess, forcing the rescission of all previously-allocated "bailouts" and refusing to leave until a level playing field is achieved. One must wonder if Gettlefinger and the union "brothers" really are brothers at all, or whether the last 20 years has made them, once the most-feared political constituency in America, yet another neutered political has-been incapable of anything beyond a bad parody of carnival barking.
Real economic growth and the stabilization of the job base, along with normalization of the credit markets will not and in fact cannot happen until this takes place.
We must as a nation choose - we can either choose a continued descent into chaos that literally threatens our way of life and political system, or we can choose to force those who made bad bets, whether they be improperly-underwritten loans, naked CDS written without capital or those who speculated in the purchase of their house to go through the bankruptcy process and thus remove from the system insoluble debt via the process of bankruptcy and default.
The latter choice is politically unpalatable but it beats the loss of social order, the collapse of our economy and credit markets and ultimately the collapse in government funding that can (and will, if allowed to descend to that level) result in the loss of our government and way of life.
The time is ripe to buy foreclosures or short sales!
The key to finding a good deal is thru careful research or using the expertise of a realtor. Which method you chose depends on your experience level.
Foreclosures can be found in public records at the recording office of your county or by contacting individual banks and asking for a list of their foreclosures for sale.
Short sales are a bit more complicated since you must first get the owner to reduce their asking price and basically walk away with nothing. Then you must negotiate with the mortgage holder asking them to accept less than the amount that is owed. This process takes time and patience. It will also be frustrating. The reward for your frustration could be a great deal on a home well below market value.
If you have any questions on foreclosures, shortsales or mortgage programs available please call me direct.
Steve Jeppesen
352-817-3080
Fannie Mae is set to release the Home Saver Advance program in May of 2008. This is their latest example of their commitment to homeowner preservation. The Advance program is an unsecured personal loan, available to approved fannie mae servicers for eligible borrowers to help bring a delinduent loan current. It provides funds to cure arrearages of principal, interest, taxes, and insurance. The advance is documented by a promissory note signed by the borrower, payable over 15 years at 5% interest! No payments or interest accrual for the first 6 months.
The program is designed for borrowers who have fallen behind on their mortgage, but are able to resume regular payments once their loan is brought current. It will streamline the workout process for applicable loans, as it provides an option for earlier resolution for delinquent loans.
•Loan amounts up to the lesser of 15% or $15,000 of the original unpaid balance for delinquent PITI(principle, interest, taxes, insurance), escrow advances, & advances of attorney fees and costs plus up to 6 months of unpaid HOA fees or 12 months if the HOA fees are paid once per year
•Advances may not include late charges or other ancillary fees
•The full loan amount is applied directly to arrearage(borrower never receives funds in hand)
•Truth in Lending and promissory note are executed at time of agreement w/ borrower
•Note rate fixed at 5% with 6 month period of no interest/no payment period
•Amortization period of 14.5 years after the initial 6 month period
•Workout fee paid to servicer is $600
•Fannie Mae will contract w/ a 3rd party to service the promissory notes
Eligibility
Advance can be made in connection with any mortgage loan that is purchased by Fannie Mae, including portfolio loans, if the mortgage meets the following:
•Mortgage is delinquent in an amount equal to or greater than 2 full payments of PITI
•Mortgage must be seasoned with a minimum of 6 monthly payments made since the closing of the loan
•Mortgage may secure a principal residence, 2nd home, or investment property-owner occupied is not required
•Mortgage may generally be any type of loan(fixed, adjustable-rate, interest only, etc.)
There are NO LTV restrictions or property valuation requirements
Borrower Eligibilty
•Borrower has successfully resolved reason for delinquency
•Demonstrates a long-term financial ability to resume making payments on 1st mortgage and other debts, including any subordinate loans.(verbal confirmation is acceptable)
•Borrower has surplus income to support an additional monthly payment of at least $200 but does not have the ability to cure the arrearage using a repayment plan within a period of 9 months
•The borrower is willing to participate in program
•Borrower does not have a current outstanding Homesaver note. Homesaver option can only be used once during the life of the particular first mortgage loan
Borrowers involved in an active bancruptcy proceeding or who have had the debt previously discharged in bancruptcy are not eligible.
The credit scoring system we have all become accustomed to is about to change. A few things to keep in mind if you are working on cleaning up your credit are:
Scores range from 300 points to 850 points
Minor random late payments will no longer cause a huge drop in the score
Consistently late payments will be given more weight
Authorized user accounts will no longer be used to determine scores (this will eliminate "buying" good credit by having some one with a great credit history add a person onto their accounts for a fee)
Credit scores will be better for those who have a blend of credit, such as a mortgage, car payment and credit cards instead of having all credit cards or only a mortgage, etc.
Look for more updates on this in the future.
First came the subprime fallout mess and now the after effects are coming. After everyone bought homes based on a credit score rather than true factors, such as employment and ability to repay, the housing market is in it's adjustment phase. Now there is such a surplus of homes compared to buyers the home values are falling off. As more and more foreclosures take place over the next 6-12 months the home values will fall at a forecasted rate of 13-15%. According to Moodys Economy Report, there isn't an expected measurable recovery until 2010!
What this means to the average "joe" is get out of your adjustable or use your equity while you can. If you are one of the millions who have an adjustable mortgage that will reset in 08-09, you could wind up with a higher rate than you thought if yo wait. For instance, if you have a 75% loan to value loan right now and you refinance in 4-6 months, your new loan to value will be between 85-90% causing you to pay mortgage insurance or a higher rate to avoid the insurance. If you have plenty of equity and can afford to pay a little extra each month, you may want to think about taking some of that cash and investing it rather than taking a 15% hit on that money. Most investment firms can set up a portfolio earning between 12-15% per year.
There are many people who bought homes between 05-06 for $0 down and will soon owe much more on their homes than they are even worth. If you're not sure about your position call today and find out what your next step should be. Don't wait until it's too late and become a casualty of the market.
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