Mortgage industry pros adjust to new 'final rule'

Friday, March 12, 2010

Mortgage industry pros adjust to new 'final rule'

Denver Business Journal - by Paula Moore

A new federal regulation designed to make the homebuying process easier and more transparent for purchasers has caused delays and other problems for some real estate professionals since it went into effect Jan. 1.

But residential real estate brokers and mortgage professionals who deal with the new rule say they're getting used to its forms, procedures, buyer education and other components.
Mortgage professionals - lenders and brokers - face a financial hit if they don't correctly handle the new regulation.

"The final rule involves a lot of change ... a business framework change, and everybody is working through the change right now," said Joel Horn, president and CEO of Denver-based Mortgage Spirit LLC, a provider of loan research and technology to the mortgage brokerage industry. "It's going to take a bit to get through the change curve, but over the next three to six months, the issue will die down."

The "final rule" is part of the Real Estate Settlement Procedures Act (RESPA), which was enacted in 1974 to help homebuyers find the lowest-cost mortgages and refinancings. The rule relates to good-faith estimates for mortgage loans, and it was adopted in November 2008. The regulation went into effect Jan. 1, after about a year's grace period.

Penalties associated with violations of the new rule kick in May 1.

The U.S. Department of Housing and Urban Development controls and enforces RESPA.
Under the final rule, mortgage providers must give homebuyers a good-faith estimate of a mortgage loan's major terms as well as closing costs. The estimate should include whether a loan has a fixed or variable interest rate, if the borrower will incur a pre-payment penalty for refinancing the loan and if the loan includes a balloon payment.

As part of the new rule, the good-faith estimate document has been shortened to three pages from four, and consumers can compare estimated closing costs with actual costs included in their HUD-1 settlement statement. The settlement statement is a comparison of estimated closing costs with the actual costs, and real estate agents provide it at the closing of a home sale.
The rule has caused delays in closing home sales, but only by one to three weeks, according to agents. Some real estate pros were worried delays would be more than double the standard 30- to 35-day closing period.

"It's not delaying closings as much as we originally thought it would," Gary Bauer, an independent residential real estate broker in Littleton, said of the final rule. "We've had delays of about a week because of the educational process with buyers, but I think that will change as people get used to the change."

Some real estate agents have been careful not to schedule closings too close together, to give themselves time to deal with changes in the closing process. "We're going back to the old days, where the transaction is a little more comfortable," said Jolon Ruch, a broker at Keller Williams Realty Inc. in Westminster and a vice president of the Colorado Association of Realtors.

Charles Roberts, a broker owner at Your Castle Real Estate LLC in Littleton and board member of the Denver Board of Realtors, has noticed no problems among his agents because of the new rule. But because Roberts is both a loan officer and a real estate agent, he has observed that "this thing is more difficult for the loan officer."

"The good-faith estimate is supposed to be a good shopping tool for homebuyers. ... It's costly [to the mortgage lender] if you make a mistake, but it's made lenders not make mistakes, which is better for every consumer," said Pete Lansing, president and CEO of Universal Lending Corp. of Denver, one of the metro area's major mortgage lenders.

With the good-faith estimate, mortgage lenders and brokers have more incentive to do their jobs correctly because of penalties related to "tolerances" in the rule.

The rule has zero tolerance for increases in how much mortgage professionals charge for their services, including origination fees and transfer taxes. Once those charges are set, they can't be increased, and if mortgage professionals underestimate fees, they have to absorb that cost.
The rule gives a little leeway - 10 percent - on changes in estimated closing costs on a home purchase, such as title insurance and government recording charges. If actual closing costs vary more than 10 percent from the estimate, the mortgage lender refunds the difference to the buyer.

"People in our industry are focused on getting it right. ... They want to make sure loans are done correctly," said Bob Montoya, executive director of the Colorado Mortgage Lenders Association.

business

Foreclosures create some deals among luxury homes

By Margaret Jackson The Denver Post

Posted: 01/03/2010 01:00:00 AM MST

Even as Denver's overall housing market shows signs of improvement, the number of high-end homes slipping into foreclosure continues to climb.

Last week, 31 homes valued between $500,000 and

$4 million went into foreclosure, including four over

$1 million, said Ron Woodcock, a broker with Re/Max Southeast who tracks foreclosures.

Much of the problem stems from the inability of potential buyers to obtain "jumbo" loans — financing above $417,000.

"Jumbo money has dried up across the country, and that market is going to be a disaster," Woodcock said.

Sales of homes over $1 million plunged 40 percent between 2008 and 2009, said Lon Welsh, managing broker of Your Castle Real Estate, and sales of non-distressed homes declined 46 percent. But foreclosure sales increased 56 percent, from 16 to 25 homes sold, in that time frame.

Short sales were up 433 percent, from three to 16 sales.

"We expect to see that the number of luxury distressed sales will continue to increase dramatically in 2010," Welsh said. "If you are a buyer with a long time horizon, 2010 will be a great time to hunt for deals."

Even homes that aren't in foreclosure are being offered at deep discounts.

Luxury real-estate specialist Edie Marks has twice dropped the price of a Cherry Hills Village estate that's been languishing on the market. The 15,000-square-foot house on 4.7 acres initially was listed at $8 million. Today, it can be had for $3.5 million.

"The people that have money are sitting in a kind of cocoon," Marks said. "They're not making decisions because they're concerned about what's coming down, in terms of taxation and vindictiveness against the wealthy."

The good news is this is a once-in-a-lifetime opportunity for buyers to purchase the home of their dreams at below-

market pricing, said Rollie Jordan, a luxury-real-estate specialist at The Kentwood Co. at Cherry Creek.

"There are some great values out there," said Jordan, whose last three deals have been foreclosures and short sales. "My clients are happy, and I am happy that they were able to get a great buy."

It's also a better deal for banks, said George Leonard, a broker with Your Castle. The property remains occupied, so the bank does not have to worry about maintaining it or keeping it heated.

"Banks are beginning to see that it's cheaper to do a short sale than it is to do a foreclosure," he said. "When a foreclosure happens, the bank loses about 70 percent. If they do a short sale, they only lose 40 percent."

But getting a great deal through a short sale is likely to take some time. It takes an average of three or four months for the bank to approve an offer, said Jon Cole of RealtyTMS, a Boulder company that manages short sales for realty agents.

"It can linger on, depending on how difficult the bank is, how responsive they are and what requirements they're seeking, and how long the buyer is willing to wait," Cole said. "Sometimes, the buyer gives up and moves on to another property."

Read more: http://www.denverpost.com/business/ci_14111783#ixzz0bYcSxSPi

Good Deals For Prospective Condo Buyers

TheDenverChannel.com

Related To Story Video: Condo Prices Still Falling

Good Deals For Prospective Condo Buyers

Experts Say It's A Buyers Market But Loans Still Hard To Get

POSTED: 5:36 pm MST December 14, 2009

UPDATED: 8:28 pm MST December 14, 2009

DENVER -- If you're interested in the urban lifestyle, there is great selection. However, real estate experts warn prices will probably continue to drop and it could be hard to get a loan."There’s a huge discrepancy with the low end, and not even the luxury market, even $285,000 to $300,000 you have a lot of inventory right now, which is why you’re seeing sellers trying to sell and prices coming down in a lot of these areas," said Charles Roberts, a mortgage broker with Your Castle Real Estate.Prospective buyer Blake Harrison agrees."Obviously there’s selection, but some are more than they’re worth," said Harrison.Harrison said he's attracted to condo living because of the low maintenance, the amenities and the location.

In Denver, condo prices vary greatly. Even at "The Spire", located on 14th Avenue in downtown Denver, units range from $200,000 to $1.1 million."What we’ve seen in this economy is we’re selling from the bottom up," said Chris Crosby, the Executive Vice President of Nichols Partnership, the developer.Of 493 units, Crosby said they had sold 110. The first buyers will move in next month."We’ve been selling about three to four per week here so sales velocity has been pretty strong," said Crosby.However, Crosby acknowledges that buyers have a lot to choose from. In part, he credits incentives for helping to sell units."We’ve done a $35,000 dollar incentive on some selective floors," he said.

Crosby said that means buyers can take $35,000 dollars off the selling price, or get that much in upgrades."They’re making deals. They want to get these things sold," said Roberts.So, 7NEWS asked if it's a condo is a good investment right now."If you’re an investor, and it makes sense for you it can be a very good time right now, the rents are fairly strong and the interest rates are low," said Roberts. "

As an owner, sure, if you want to live some place and you’re going to be there for awhile and you’re qualified right now, it’s great."However, Roberts added prices will probably continue to drop before going up.

"The prices have gone down about seven percent in the last year. They went down about nine percent the previous year. I personally don’t think we’ve hit bottom above $200,000," he said.Getting a loan can be difficult too, according to experts."They’re usually treated as a more risky investment," Roberts said. "You’re not just buying your condo. The lender has to buy into the whole project. They’re going to want to know what percentage of the other units are owner-occupied. They're going to want to see 51 percent of units owner occupied. Also, with new developments, they need to see construction pre-sales."

Roberts said be prepared to have 10 percent down in order to qualify.

Friday, November 20, 2009

Tax credit fails to help in tight housing market

Denver Business Journal - by Paula Moore

Denver-area residential brokers are happy the federal government extended its homebuyer tax credit program in early November, saying it shows the Obama administration is continuing efforts to stimulate the economy and restore consumer confidence.

But some brokers think the credits won’t do much good locally, because of a lack of the relatively low-priced homes up for sale that attract consumers who can take advantage of the credits.

Local residential real experts also see the new homebuyer credits, which expire April 30, 2010, as the beginning of the federal government weaning home shoppers off such credits. “I don’t expect an extension of these credits,” said independent residential broker Gary Bauer of Littleton.

President Barack Obama signed into law on Nov. 6 a federal bill extending this year’s $8,000 first-time homebuyer tax credit until next April, with a deadline for home closings of June 30. The first-time buyer credit was scheduled to expire Nov. 30.

The legislation also added a $6,500 credit for repeat homebuyers.

The government defines first-time buyers as those who haven’t owned a home in three years. Repeat buyers include existing owners who have been in their homes at least five years in a row, but want to get into bigger homes — or, as in the case of empty-nesters, smaller ones.

“Our market for homes priced at under $200,000 is already overheated; it doesn’t need a lot of tax breaks to encourage sales. … If current indications in the housing market continue, the lowerish market will have recovered in the next six months,” said Charles Roberts, broker-owner at the Your Castle Real Estate LLC residential real estate brokerage firm of Littleton. “We won’t need tax credits.”

As of Oct. 1, standard single-family houses priced at $85,000 and under had less than one month’s inventory, while homes priced at $85,000 to $135,000 had a 1.8-month supply, according to data from Your Castle and local home-sale data provider Metrolist Inc. Houses with price tags of $135,000 to $210,000 had a 2.9-month inventory.

The housing price range that needs stimulating is the $460,000-plus one, which has a 20-month inventory, brokers said.

The inventory of lower-priced homes up for sale is so low largely because of the success of the 2009 first-time homebuyer tax credit, which succeeded the Bush administration’s $7,500 repayable credit of 2008, according to residential brokers. This year’s credit has helped especially to get bargain-priced foreclosure homes off the market.

“For the first seven to eight months of this year in the Denver market, 40 percent of home transactions were by first-time buyers. … I have a first-time buyer, and we’re just sitting in waiting mode,” Bauer said. “When a model of the home he wants comes on the market, we’re trying to be the first to get in and get a shot at it.”

Derek Francis-Diamond, a Sports Authority salesman who moved to metro Denver a few months ago from Arlington, Va., wants to buy his first house for $120,000 to $150,000 and bring in roommates to help defray the cost. The avid skier said he hopes to find “a good number of homes” in that price range, preferably in the western metro area close to the mountains, but he hadn’t started looking for houses yet as of mid-November.

“I would like to use the first-time homebuyer tax credit; it’s one of the things I’m hoping for,” Francis-Diamond said.

The metro-area inventory of for-sale homes could go up at the beginning of 2010, if consumer confidence improves and banks put more houses they’ve taken back in foreclosure on the market, according to some brokers.

Homeowners wanting to sell their homes, but who have held off fearing they won’t get a good price, may put those homes on the market next year. Brokers hope such owners will want to take advantage of the $6,500 repeat buyer tax credit to purchase a bigger home or, as with many empty-nesters, go into a smaller house or condo.

“Some homeowners are sitting there not knowing what to do,” said Kay Watson, broker-owner of K. Watson Properties-Metro Brokers in Centennial. “If they have good job stability, the repeat buyer credit may be the thing that will help them make a decision. They’ve lost some equity, but this credit may be enough to encourage them to move into the larger house they need … or to move down. … It will all hinge on job stability.”

Although repeat buyers probably will add home inventory to the market, they also could take it away when they purchase new homes. “While the number of sales should increase because of repeat buyers, they’ll be a washout for inventory,” Roberts said.

Shannon Peer, counseling manager at Brothers Redevelopment Inc. in Denver, likes that the new homebuyer tax credits are trying to cut down on fraud by requiring documentation of a closed sale, and that they could generate more home sales. But Peer worries that the credits might also push buyers into the market who shouldn’t be there yet.

“Somebody might use a homebuyer tax credit to get in over their heads [with their mortgage],” Peer said. “They’re OK the first year they own the home, when they have the credit, but the second year comes around, and the tax credit isn’t there. We need to use these incentives wisely.”

Brothers Redevelopment is a nonprofit that provides housing services to low-income consumers, including homebuyer education.

business

Homebuyer tax credit extended

By Margaret Jackson
The Denver Post

Posted: 11/06/2009 01:00:00 AM MST

The U.S. House of Representatives on Thursday extended a soon-to-expire $8,000 tax credit for first-time homebuyers through April and expanded the program to include a $6,500 credit for buyers who have owned their existing homes for at least five years.

Local real estate agents said the bill, which President Barack Obama is expected to sign today, will make it easier for homeowners to get back in the market. The measure also includes provisions to extend unemployment benefits and a tax break for businesses that are losing money.

"They're calling it the move-up credit," Rachel Hultin, a broker with Denver's Urban Niche Realty, said of the credit for homebuyers. "But it will allow people to sell homes and do a lateral or buy-down move. If they had to bring money to a closing and that $6,500 wasn't on the table, they might not be able to do it."

First-time homebuyers have been getting tax credits of up to $8,000 since January as part of economic-stimulus efforts. The program was set to expire at the end of the month.

Both first-time and move-up buyers now have to sign a purchase agreement by April 30 and close by June 30 to take advantage of the credits.

The credit is available for the purchase of principal homes costing $800,000 or less, meaning vacation homes are ineligible. The credit would be phased out for individuals with annual incomes above $125,000 and joint filers with incomes above $225,000.

The credit would be extended an additional year, until June 30, 2011, for members of the military serving outside the United States for at least 90 days.

"I have (first-time buyer) clients who did not get it together fast enough to close by Nov. 30, so I'll have a number of happy clients," said Liana Pomeroy, a certified mortgage-planning specialist with Cherry Creek Mortgage. "Many of my clients just haven't found what they want, and some people need to do some credit repair or save some more money."

Extending and expanding the program is expected to cost the government about $10.8 billion in lost taxes.

"We have seen a very positive impact from the $8,000 first-time-buyer credit and are hopeful this new tax credit will bring the same results," said Dee Chirafisi of Kentwood City Properties. "In today's market, it is always helpful to have an incentive for buyers and a timeline that helps to create a sense of urgency and a reason to buy now."

1.4 million helped

Through August of this year, about 1.4 million people nationwide had taken advantage of the tax credit, accounting for about 40 percent of all purchases, according to estimates by the National Association of Realtors and the National Association of Home Builders. About 350,000 of those buyers would not have purchased their homes without the credit, according to the Realtors group.

The tax credit has had the biggest impact on lower-priced homes because first-time buyers generally look for move-in- ready homes priced less than $200,000.

While the overall market in metro Denver showed an 18 percent drop in sales volume from January through August, the under $200,000, non-distressed segment had a 7 percent increase, according to an analysis of Metrolist data by Lon Welsh at Your Castle Real Estate.

"The tax credit has a total trickle-up effect in our market in all price ranges," said Amy Bachelder Bayer of PorchLight Real Estate Group. "It's instilling confidence in buyers. Entry-level people are making decisions to buy, those sellers are moving up to the next price range, and those people are moving up."

Thought it was too late

The extension means 21-year-old Nick Steele will get to take advantage of the credit after all. Steele, who works for a metro Denver police agency, had been stashing away cash to buy a house. He decided the time was right because of low housing prices, favorable interest rates and the tax credit.

But he couldn't find a house he wanted until it was too late to take advantage of the tax credit.

"I got into the contract thinking that I wasn't going to get the credit, but that was a sacrifice I was going to have to make," he said. "I didn't want to live somewhere I didn't want to be just for the $8,000. Now that they've extended the credit, we should be good."

Margaret Jackson: 303-954-1473 or mjackson@denverpost.com

Metro Denver home resales slip; prices rise

Move-up buyers, affordability and location are helping to push median figures higher.

By Margaret Jackson
The Denver Post

While home resales in the Denver metro area declined in September compared with a year ago, median sales prices for houses and condos increased, according to data released Wednesday.

A total of 3,846 homes sold in September, down 9.8 percent from September 2008, according to Metrolist data. Meanwhile, median prices for single-family homes rose 4 percent to $225,000, compared with $216,500 a year ago. Condo prices increased 3.6 percent to $145,000, compared with $139,900 in the same month last year.

"With condos, it's affordability and location," said independent real-estate analyst Gary Bauer. "We also have this underlying effort going on called the green movement, and more and more people are looking closer to work or alternative transportation."

An increasing number of move-up buyers in the market has pushed the median prices higher as well, Bauer said. Move-up buyers typically purchase homes in the $150,000-to- $250,000 range, he said.

"The majority of the activity has been in the lower price ranges," Bauer said. "The higher price ranges are stagnant."

The number of homes on the market declined 17.1 percent to 19,834, compared with 23,923 a year ago, a number that's likely to continue falling through the end of the year because of the holidays and the high number of first-time buyers in the market.

"We're seeing a lot of first-time buyers that would like to buy, but there just isn't enough inventory out there for all of them," said Lon Welsh, managing broker of Your Castle Real Estate. "We suspect the lack of really inexpensive homes for sale has changed the sales mix to a higher price point, driving up the average price."

Margaret Jackson: 303-954-1473 or mjackson@denverpost.com