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Housing Industry Awaits Down-Payment Rule for Mortgages | Mt Kisco Realtor
As bankers, real estate agents and others in the housing industry absorb thousands of pages of mortgage rules issued in the past week, they’re still waiting to see if U.S. regulators will set a minimum down payment for home loans.
Regulators including the Federal Deposit Insurance Corp. and the Federal Reserve drew protests in 2011 when they proposed a rule requiring lenders to keep a stake in mortgages with down payments of less than 20 percent. Bankers and consumer groups said such a requirement would shut creditworthy borrowers out of the market.
The so-called Qualified Mortgage rule issued by the CFPB requires lenders to verify borrowers’ ability to repay their loans and offers legal safe harbor for lenders who follow guidelines for safe mortgages. Photographer: Daniel Acker/Bloomberg
Now, regulators say they expect to release a final version of that so-called Qualified Residential Mortgage rule in the next few months. Together, the QRM rule and additional measures governing underwriting and servicing released by the Consumer Financial Protection Bureau in the past week will fundamentally reshape who can lend and who can borrow because banks will probably make only those loans that conform to the new standards.
“I have consistently warned of the regulatory tidal wave to come and it’s finally upon us,” David Stevens, president of the Mortgage Bankers Association said during a speech in Washington on Jan. 16. “These changes will impact business operations and the future of mortgage access for years to come.”
Stevens said his organization has received hundreds of e- mails and telephone calls from members trying to understand the new regulations, which were mandated by Congress in response to lax underwriting standards before the 2008 financial crisis.
Underwriting Rules
The so-called Qualified Mortgage rule issued by the CFPB Jan. 10, weighing in at 804 pages, requires lenders to verify borrowers’ ability to repay their loans and offers legal safe harbor for lenders who follow guidelines for safe mortgages.
The CFPB offered strong legal protection for loans on which borrowers’ debt payments are no more than 43 percent of their income. Points and fees for such mortgages can’t be more than 3 percent of the total loan amount. Loans backed by the government through Fannie Mae (FNMA), Freddie Mac, and the Federal Housing Administration automatically qualify for legal protection for the next seven years.
The CFPB stopped short of adding a requirement for a minimum down payment. Now the six regulators drafting the separate QRM rule, including the Department of Housing and Urban Development, the Office of the Comptroller of the Currency and the Securities and Exchange Commission, must decide whether to include such a requirement — and whether to make it less than the 20 percent they originally proposed.
‘Politically Expedient’
Down payment size “is the major credit-risk driver in mortgages that was untouched by the QM rule,” Karen Shaw Petrou, managing partner of Federal Financial Analytics in Washington, said in an interview.
Defining safe loans as those with a 10 percent down payment, instead of 20 percent, “is the politically expedient course to take,” Petrou said.
Others, including Republican Senator Johnny Isakson of Georgia, are calling for a down payment requirement as low as 5 percent and a continued role for private mortgage insurance to hold a share of the risk on loans with less than a 20 percent down payment.
Meanwhile, there are many unanswered questions about the impact of the rules already released, Stevens and other industry participants say. Bankers say they worry that the QM rule could prevent borrowers from obtaining so-called jumbo mortgages, which are larger than the $729,750 ceiling on FHA-eligible loans or the $625,000 ceiling on loans backed by Fannie Mae and Freddie Mac.
Included Fees
In addition, it’s unclear what will be included in the provision capping fees at 3 percent of the loan amount, and what will happen if mortgages originated in good faith are later found not to meet underwriting standards.
The CFPB yesterday also released 1,600 pages of regulations setting requirements for mortgage servicers, including new limits on foreclosures while borrowers are simultaneously negotiating loan modifications.
The regulations, which apply to servicers who handle at least 5,000 loans, also require clear mortgage bills that warn consumers before their interest rates adjust. The servicing rules and the QM rule are scheduled to go into effect in January 2014.
The servicing rules’ complexity could lead to unintended consequences that will need to be addressed as soon as possible, Stevens said.
‘Second Correction’
“I’m concerned we’re going to force a second correction in the housing market by creating a regulatory clampdown on fully sustainable homeownership because too many people haven’t really dissected the deep nuances of these rules,” he said in an interview yesterday.
Mortgage credit is already tight. Borrowers whose loans closed in 2012 had an average credit score of 748, which would place them in the top 37 percent of Americans, according to Ellie Mae (ELLI), a Pleasanton, California, company that provides software for the mortgage industry. Those buyers made down payments averaging 21 percent. The interest rate on a 30-year fixed-rate mortgage averaged 3.9 percent in 2012, Ellie Mae said.
Still to come from the CFPB are new rules governing loan officer compensation and regulations governing simplified loan documents.
International regulators are phasing in new capital standards mandated under the Basel III accord by 2019. Those will require banks to hold more capital against certain mortgages.
The full impact on lending will only become clear once all the rules come out, and the most restrictive rules will determine the scope of the market, said Tim Rood, a partner in Washington-based consulting firm Collingwood LLC.
“Particularly in an environment as heightened as this one, you’re going to regress to the lowest common denominator from the credit perspective,” he said. “Whichever of these standards is the most conservative is the one that you’re going to adhere to.”
via bloomberg.com
Post Free Healthy-Home Tips | Mt Kisco Realtor
One-quarter of U.S. residents have either allergy or asthma symptoms, according to WebMD. In addition, 90 percent of our lives are spent indoors, reports the medical Web site.
Help owners be healthier in their own homes by posting to Facebook a free article, “8 Tips to Make Your Remodel More Energy Efficient and Your Home Healthier,” from the REALTOR® Content Resource. It’s just one of five free articles now available in the January “Plan for Your Winter Remodeling Projects” theme.
Mount Kisco Real Estate | Is insulation upgrade a good investment?
We often talk about the importance of energy upgrades for your home. But if you’re thinking about an upgrade this winter, such as adding more insulation to your attic, you may be wondering exactly how to calculate whether that’s a wise financial investment.
There are a variety of formulas available for making this calculation, such as the one from the U.S. Department of Energy (DOE).
It’s not a terribly difficult formula to use, and I’ve modified it here to make it a little more understandable.
You’ll need to do a little research to track down some basic information to fill in the blanks, all of which you can get off the Internet or with a couple of phone calls. Then it’s just a couple of minutes with a tablet and a calculator.
Incidentally, this formula also works for upgrades to wall insulation (you can click here to read more on that).
The formula and definitions
The DOE’s formula is as follows: (Ci x R1 x R2 x E) ÷ (Ce x [R2 – R1] x HDD x 24)
OK now, don’t let your eyes glaze over, or have terrifying flashbacks to high school algebra class. Here’s what all those variables stand for:
- Ci: This is the cost of the insulation you’re considering, in dollars per square foot. If you’re doing the work yourself, it’s the cost of the materials, supplies and any rental equipment you need. If you’re having the work done, it’s the estimated cost from the contractor.
- R1: This is the R-value of the insulation you currently have in the attic.
- R2: This is the R-value you want to upgrade to.
- E: Efficiency rating of your heating system. How well your heating system heats your home plays a major role in how much you’re going to save with an insulation upgrade; the less efficient your heating system is, the more energy dollars the additional insulation will save you each year. You may know the specific energy efficiency rating of your particular heating system, or you may be able to get it from your utility company or HVAC contractor. If not, the DOE offers the following general suggestions: oil and propane furnaces, 0.6 to 0.88; natural gas furnaces, 0.7 to 0.95; electric, 1.0; heat pump 2.1 to 2.5.
- Ce: This is what you’re paying for the energy you use, converted to dollars per British thermal unit (Btu). To arrive at this number, you’ll need to divide the actual price you pay for the fuel you use (electricity, gas, etc.) by the Btu content of that fuel. You can find the price you’re paying on your utility bill or by calling your utility company.
The Btu content of various fuels is as follows:
No. 2 fuel oil = 140,000 Btu/gallon Electricity = 3,413 Btu/kilowatt-hour Propane = 91,600 Btu/gallon Natural gas = 103,000 Btu/cubic feet or 100,000 Btu/therm
- HDD: This stands for heating degree days, which is a standard method for determining how cold a specific geographic location is, and how much demand there will be for heating. It’s determined by the statistical average of the number of degrees that a day’s temperature falls below 65 degrees Fahrenheit, which is considered the temperature at which a building needs to be heated. The higher the number of heating degree days in an area, the more demand there is for heat, so the greater the savings will be from an insulation upgrade. You can get your area’s HDD number from your utility company or off the Internet.
- 24: Hours in a day, used in this formula to convert HDD from days to hours.
An example
OK, hopefully you’re still with me. Now let’s pull all that together into a typical example. Let’s say you have a 1,500-square-foot home with R-11 insulation in the attic. You have electric heat, and you’re currently paying 9 cents per kilowatt-hour for electricity (learn more details at Insulation4US site). You’re thinking of upgrading to R-38, and a contractor has given you an estimate of $1,200 to do the work. A quick check on the Web has shown you that your area has approximately 7,500 heating degree days.
Here’s how all that would plug into the formula:
- Ci: 0.80. (Cost of insulation is 80 cents per square foot, based on a $1,200 estimate divided by 1,500 square feet).
- R1: 11. (Existing attic insulation is R-11).
- R2: 38. (Proposed upgrade is R-38).
- E: 1.0. (Electric heat has an efficiency rating of 1.0).
- Ce: 0.000026. (Electricity in your area costs $0.09 per kilowatt-hour, divided by 3,413 Btu/kwh).
- HDD: 7500 (The number of heating degree days in your geographical location).
Now, take the formula in plug in the numbers, then do the math:
- (Ci x R1 x R2 x E) ÷ (Ce x [R2 – R1] x HDD x 24)
- (.80 x 11 x 38 x 1) ÷ (0.000026 x [38 – 11] x 7500 x 24)
- 334.4 ÷ (0.000026 x 27 x 7500 x 24)
- 334.4 ÷ 126.36 = 2.64 years
So, based on this formula and all the variables, you can expect the insulation upgrade to pay for itself in a little over 2 1/2 years.
via inman.com
Top Lenders Clear out Foreclosure Inventories in Non-judicial States | Mt Kisco NY Real Estate
Among the five lenders involved in the National Mortgage Settlement – Bank of America, Wells Fargo, JPMorgan Chase, Citi and Ally/GMAC – non-judicial pre-foreclosure activity (NOD, NTS) decreased 41 percent in November compared to a year ago, led by Bank of America with a 63 percent decrease and Citi with a 40 percent decrease. Meanwhile judicial pre-foreclosure activity (LIS, NFS) for the five lenders combined increased 26 percent from a year ago, led by Chase with a 114 percent increase and Wells Fargo with a 37 percent increase.
In November, foreclosure activity decreased of 3 percent from October and is down 19 percent from November 2011 – marking the 26th consecutive month with an annual decrease in foreclosure activity, according to RealtyTrac.
“The drop in overall foreclosure activity in November was caused largely by a 71-month low in foreclosure starts for the month, more evidence that we are past the worst of the foreclosure problem brought about by the housing bubble bursting six years ago,” said Daren Blomquist, vice president at RealtyTrac. “But foreclosures are continuing to hobble the U.S. housing market as lenders finally seize properties that started the process a year or two ago – and much longer in some cases. We’re likely not completely out of the woods when it comes to foreclosure starts, either, as lenders are still adjusting to new foreclosure ground rules set forth in the National Mortgage Settlement along with various state laws and court rulings.”
D.C. house inspires 168 bids in red-hot real estate market | Mt Kisco Real Estate
RealtyTrac: Distressed property and REO sales rise in 3Q | Mount Kisco Real Estate
via housingwire.com
Five bargain renovations that add value | Mount Kisco NY Real Estate
Photo: Thinkstock
Do you have grand visions of gutting your dated kitchen, or maybe blowing out the bathroom walls to create a spa-like retreat? While major remodeling projects such as these can bring value to a home, budget-friendly projects can also deliver a fresh look – and real value for you and potential buyers.
“Something as simple as replacing the hardware in the kitchen can give you a whole new look,” says Paul Wyman, a regional vice president with the National Association of Realtors. Wyman is also an expert at determining if a remodeling project will add value to a home.
Curious which simple projects will give your home the most value? Keep reading to learn about a few affordable facelifts and bargain renovations that could boost your home’s value and add appeal.
Bargain Renovation #1: Reface Kitchen Cabinets
Would you believe that something as simple as replacing dated cabinetry doors could get you a higher return on investment than other major remodels? We didn’t either, until Remodeling Magazine’s 2011-2012 “Cost vs. Value Report” told us otherwise.
If the cabinets in your kitchen are well laid-out, sturdy, and plentiful but unappealing, refacing can be a cost-effective alternative to complete replacement. This process, which maintains the existing cabinetry’s frames and boxes but replaces the hardware and door and drawer fronts, can be just a quarter of the price of installing all-new cabinetry.
What does that look like in hard figures? Kitchen Solvers, a resurfacing company in La Crosse, Wisc., offers the example of a client paying $6,000 to install solid cherry doors on existing cabinetry, rather than shelling out $24,000 to install everything new. That sure sounds like a good savings to us.
Bargain Renovation #2: Install a New Kitchen Countertop
If you adore the luxurious look of a stone countertop but don’t love the high price, there are ways to achieve the high-end feel of granite or marble without breaking the bank.
You can save on granite, for example, by buying remnants from a stone yard, according to a July 2012 Consumer Reports article titled “Get the luxury look for Less.” Or, if you have your eye on marble, a slab from Vermont will cost at least 20 percent less than one from Italy, according to the report.
For a truly budget-friendly option, Consumer Reports suggests that you consider a laminate countertop.
Laminate, which is made of sheets of plastic resin and paper bonded to particle board or fiberboard, could resemble granite or marble with today’s printing technologies, notes Consumer Reports.
Bargain Renovation #3: Update the BathroomAccording to HGTV’s “Maximum Value Projects,” on FrontDoor.com, updating a bathroom is a great way to add value to your home. And it doesn’t take much to make a big difference.
In fact, HGTV says updating the sink and fixtures will yield more value than replacing the countertop, flooring, toilet, or even the tub and shower. To avoid the premium price and save “hundreds of dollars without compromising quality,” Consumer Reports’ bathroom remodeling guide recommends selecting sinks and fixtures with basic finishes.
Looking for more value-adding updates that are gentle on your wallet? Consumer Reports suggests replacing an outdated wall-to-wall mirror with individual framed mirrors over each sink, or replacing stained grout with stain-resistant grout.
Bargain Renovation #4: Boost Curb Appeal With a New Roof
Honestly, who looks at a roof? Homebuyers, evidently. Even if most of your roof isn’t visible from the street, it is still an important aesthetic and functional feature that’s in a prime position to elevate – or squash – your home’s curb appeal.
“When people buy a house, they expect it to have a roof, but if it’s recently been redone, they will really see the value in that,” Wyman says.
Fortunately, for a flashy and durable roof, you don’t have to select a costly specialty material – like slate, tile, or metal. Composite asphalt shingles is the most common material, and it fits easily in many types of budgets, according to HGTV’s “Maximum Value Home Exterior Projects: Roof.”
Composite shingles are now available in a wide range of styles and colors, according to HGTV, allowing homeowners to create a custom look that matches the home’s façade or plays up its architectural details.
Bargain Renovation #5: Add a Deck
Looking for a new living space that will add value to your home? Look no further than the square footage waiting right outside your back door.
In fact, adding a deck to your home could offer one of the highest cost-recoup opportunities, according to the cost-value report. And you don’t have to choose a high-priced composite material. The survey found that decks built with wood actually delivered a greater return at resale than those built with composite material – boasting a 70 percent return on cost, compared to 62.8 percent.
Because deck-building is a potential DIY project – depending on your familiarity with a power saw, of course – savings could be even higher.
“Any type of work you have the ability to do yourself, with quality, makes it a bigger bargain because you’re saving on labor costs,” Wyman points out.
But if your home improvement skills are a little iffy, or you would rather sit back and relax during the renovation, it’s probably best to leave this one up to the pros.
via homes.yahoo.com
FHA changes won’t impact most buyers | Mt Kisco Real Estate
A bailout for FHA? Don’t bet on it.
And what’s the practical significance of the steps the agency announced last week to avoid a meltdown? What impact will they have for homebuyers and sellers who rely on FHA for affordable financing?
Less than you might think if you read some of the dire reports on Friday’s news: FHA’s capital reserve ratio to support its single-family and reverse mortgage programs plummeted to -1.44 percent, according to an independent audit, representing a negative economic value of more than $16 billion.
You may have also read that in response, the FHA plans to raise its annual mortgage insurance premiums from 1.25 percent to 1.35 percent early next year, and revoke new borrowers’ ability to cancel their premiums once their loan balances hit the 78 percent LTV level.
The agency also is going to expand pre-purchase counseling efforts for applicants with low credit scores and minimal down payments, and step up efforts to promote short sales to seriously delinquent owners who are likely headed for foreclosure.
Taken together, the changes don’t appear to be a big deal for most buyers who opt for FHA loans. In fact, you can argue that what’s not being changed is far more noteworthy than what is:
- Minimum down payments will still be 3.5 percent. The agency resisted demands that it boost the minimum to 5 percent.
- There will be no risk-based pricing on premiums, another demand by critics. FHA will continue to its one-price-for-all system in which low-risk borrowers essentially subsidize the premiums of higher-risk borrowers.
- Underwriting will continue to be generous on key items like debt-to-income ratios.
Whereas Fannie’s and Freddie’s automated underwriting systems cut off applicants who have back-end (total debt including housing) ratios much above 45 percent, loan officers tell me FHA sometimes allows them to push through back-end DTIs in excess of 56 percent, and even front-end (housing) ratios of more than 45 percent.
None of this is changing because, in the words of Bob Ryan, a senior adviser to HUD Secretary Shaun Donovan, “we don’t want to overreact” to an audit report that may have exaggerated the gravity of the agency’s situation.
The audit report used house price projections that did not reflect important gains in recent months, for example, and did not take full account of revenues being generated by the agency’s high-performing, low-loss recent books of insurance business.
David H. Stevens, immediate past FHA commissioner and current CEO at the Mortgage Bankers Association, told me it’s doubtful FHA will need a cash infusion next September from the Treasury because “they (the leadership at FHA) have all next year to replenish the fund” with additional tweaks to premiums, increasing the pace and productivity of REO dispositions, and restructuring the ailing Home Equity Conversion (HECM) reverse mortgage program to cut losses.
Continuing increases in home prices will help out a lot, since depressed home values in the 2008 and 2009 vintages of FHA originations have plagued the agency and created the bulk of its current problems.
The decision to retain the 3.5 percent minimum down payment was especially key, said Stevens. FHA can raise or lower premiums anytime, “but once you raise the down payment (minimum), that would be difficult to chip back.”
More importantly, raising minimum down payments would exclude large numbers of first-time buyers with good jobs who are solid credit risks, but simply lack the cash to make the type of down payments required in the conventional marketplace.
Turning away qualified applicants because they couldn’t come up with another 1.5 percent in down payment cash would be an abandonment of FHA’s traditional mission of opening the door to homeownership for moderate-income families, especially first-time purchasers and minorities.
In some local markets, FHA finances well over half of all purchase loans. In the first three months of 2012, it held around a 32 percent market share of new purchase loans nationwide.
Another step FHA didn’t announce last week but soon will: reining in seller concessions to buyers to help pay for closing costs and lender fees.
Seller concessions, like the now-prohibited seller-funded down payment assistance programs that were commonplace in 2004-2008, can distort transactions by cutting buyers’ initial stakes in the property to zero or even negative equity, and have been linked to losses to the insurance fund.
Though FHA has proposed a tiered system that would lower maximum contributions for many sellers to 3 or 4 percent and restrict the current 6 percent maximum to low-balance loans, it has not yet published a final rule.
When I asked FHA Commissioner Carol Galante on Friday for an estimate on the timing of the final rule, she rolled her eyes, lamented the frustrations of jumping through the bureaucratic hoops required to get a new federal regulation onto the street, and said “soon.”
This month? “No.” December? “I hope so.” But even when finalized, the rules will almost certainly give real estate brokers and lenders time to adjust.
So bottom line: 6 percent seller concessions are likely to be available for purchasers into the early first quarter of 2013. After that, they’re history.
via inman.com
In Westchester, 12,600 Con Ed Customers Without Power | Mount Kisco Real Estate
From Con Edison:
NEW YORK – Con Edison, aided by utility workers from across the United States and Canada, continues to replace utility poles, string wires and install transformers to restore service to those affected by Hurricane Sandy and this week’s Nor’easter.
As of 5:30 p.m., Con Edison reported approximately 28,000 customers out of service. There were about 12,600 customers out of service in Westchester County; 8,700 in Queens; 5,100 in Brooklyn; 1,400 in the Bronx; 400 in Staten Island; and fewer than 100 in Manhattan.
Con Edison has restored service to more than 1 million customers since Hurricane Sandy, which was by far the most destructive storm in company history, struck the New York area. Crews are working around the clock to restore the remaining customer outages this weekend.
Many of the outages still left in the company’s service area involve small groups of customers.
It’s been a massive job. Crews have replaced 60 miles of electrical wiring and gone to tens of thousands of locations to make repairs or tend to emergencies.
The company is also working with the New York City Buildings Department to expedite the restoration of an additional 35,000 customers in Staten Island, Brooklyn and Queens whose electrical equipment may have been damaged by flooding and cannot be safely re-energized without repairs by an electrician.
The customers requiring inside-the-premises electrical work are not listed on the Con Edison Outage Map or included in the total number of outages reported by the company. Con Edison and the New York City Buildings Department are collaborating to guide customers through the process of repairing their own equipment. For information, click here: http://www.coned.com/es/Energy-Services-Flyer.pdf.
The safety of customers and workers remained Con Edison’s highest priority, as crews responded to thousands of downed wires and hundreds of blocked roads.
Customers can report downed power lines, outages, and check service restoration status by computer or mobile device at www.conEd.com. They also can call 1-800-75-CONED (1-800-752-6633). When reporting an outage, it is helpful if customers have their Con Edison account number available, if possible, and report whether their neighbors also have lost power. Customers who report outages will be called by Con Edison with their estimated restoration times as they become available.
The company urges customers to pay close attention to reports from city and municipal officials. Important information will be posted on www.conEd.com.. For instructions on how to report an outage, click here:http://bcove.me/6sx1yox5.
Con Edison offers the following safety tips:
· Never operate a portable electric generator indoors or in an attached garage. Be sure to place the generator outside where exhaust fumes will not enter into enclosed spaces. Only operate a generator outdoors in a well-ventilated, dry area, away from air intakes to the home. The generator should be protected from direct exposure to rain and snow.
· Use extreme caution before going into a flooded basement. Know whether there are electrified services or unsanitary conditions and wear high rubber boots. Also, know how deep the water is and probe it with a wooden stick, if necessary, to gauge the depth. Keep children out of basements where there is water.
· Do not go near downed wires. Treat downed wires as if they are live. Never attempt to move or touch them with any object. Be mindful that downed wires can be hidden from view by tree limbs, leaves or water.
· Report downed wires to Con Edison and your local police department immediately. If a power line falls on your car while you’re in it, stay inside the vehicle and wait for emergency personnel.
· If your power goes out, turn off all lights and appliances to prevent overloaded circuits when power is restored.
The company is in constant communication with the New York City Office of Emergency Management and the Westchester County Department of Emergency Services and company personnel are working closely with city and municipal emergency officials. Con Edison is also getting strong assistance from numerous state and federal agencies.