Living In Tucson Blog

Like the banking sector, FHA must maintain capital ratios and with the increased popularity of FHA in the absence of other alternative products, they now insure about 30% of all new loans. FHA is nearing the limits of loans they can make based on their capital ratio. In an effort to fix this problem, FHA will be raising their upfront mortgage insurance premium to 2.25% from 1.75%. Additionally, they have requested approval for an increase in the monthly fee as well. They are maintaining the 3.5% down payment requirement unless the credit score is under 580 in which case a 10% or greater down payment is required.

To get a free pre-approval for a FHA, VA or conventional loan, call David Wolsky at 520-275-2536 or email me at david@davidwolsky.com.

Here in Tucson, over 68,000 homes are “underwater”. No, the desert has not flooded. Unless you’re in New Orleans, being “underwater” means that you owe more on your mortgage than the current value of the property. Last week we learned that 25% of homeowners in the country owe more than their homes are worth and in Tucson,  over a third are underwater. Arizona is the second worst rate in the country behind Nevada at 48% largely because the number is 54% in Phoenix!!  Now you know why banks do not consider offering home equity loans in our state and why Fannie Mae and Freddie Mac consider Arizona as a “severely declining market”.

In Ken Harney’s weekly real estate column, he writes about Brent T. White, a University of Arizona law professor who suggests that homeowners that are “under water” on their home loans, walk away!

Here’s the article: http.latimes.com/classified/realestate/news/la-fi-harney29-2009nov29,0,3801270.story://www

Josh Brodesky’s column in The Arizona Daily Star discusses White’s academic paper and the possible repercussions from walking away from mortgage. The article also gauges reactions from professionals and homeowners.

Here’s the article: AZ Starnet 11.29.09 Real Estate Article

As a mortgage originator, I cannot imagine advising a borrower to default on their mortgage. However, millions of Americans have few alternatives. It will take years for Arizona to recover from the foreclose crisis. On the other hand, this is a very desirable place to live and the housing affordability index in Arizona is at its best level in forty years thanks to low housing values and record low interest rates. If you want to get in on the market, call me! I’m David Wolsky with PHH Home Loans and can be reached at 520-275-2536! Ask me about the tax credit available for buying an owner-occupied home by June 30th, 2010.

New legislation was signed into law on November 6th. The $8000 tax credit for first time home buyers has been expanded to include a $6500 tax credit for existing home owners buying a new primary residence. Here are some of the qualification guidelines:

• You are eligible for the tax credit if you have owned and lived in your home as your primary residence for at least five of the last years. This tax credit could accommodate homeowners who lost their homes due to a foreclosure in the past couple of years, but did not replace the home. (Although it might be difficult for those folks to qualify for a new loan).
• You must have a binding contract by April 30, 2010 and a settlement by June 30, 2010 to be eligible for the tax credit
• The sales price of the home may not exceed $800,000.
• The property could be a newly constructed home, an existing home, a manufactured house, townhouse or condo. Mobile homes or houseboats are also eligible if they become your primary residence.
• You must make the replacement house your primary residence. There is no requirement in the legislation that you sell your current home. You could rent it out, turn it into a second home, or list it for sale later in 2010 when prices might be higher. If you plan to keep it, be sure to move into the new house on the day you close so there is no question it was your principal residence at that time.
• You are not eligible for the credit if you are buying a second home or an investment property.
• Congress  is requiring the IRS to scrutinize claims for tax credits (both for the $6,500 and the $8,000 for first time buyers) much more closely than it did earlier in 2009 because federal investigators have documented significant instances of fraud. Investigators found various violations, such as purchase transactions between immediate family members, which are prohibited. The revised rules require taxpayers to submit copies of their settlement statements (HUD-1 forms), along with their requests for credits using IRS Form 5405. Congress’ new rules also prohibit individuals under the age of 18 or who are counted as dependents on another taxpayer’s filings from claiming the credit.
• Eligible home buyers who go to close after Nov. 6 but no later than Dec. 31, can claim the $6,500 credit on their 2009 federal tax returns, or amend their 2008 returns. Eligible buyer who close in 2010 will be able to file for the credit on their 2009 returns or 2010 returns.
• Income limitations are $125,000 a year for a single and $225,000 for married couples filing jointly. The sale of a home could affect your income. Talk to your tax adviser for further information. You can also find information on http://www.irs.gov/.

If you or someone you know is interested in buying a house, call me, David Wolsky to get a same day approval! I can be reached on my direct line, 520-275-2536. My email address is david.wolsky@mortgagefamily.com.

The Senate has voted last night (11/4) to extend and expand a popular tax credit for homebuyers that was scheduled to expire Nov. 30. The House is expected to schedule a quick vote on the bill as early as today 11/5 as part of a package that also extends unemployment benefits for people out of work more than a year. The White House indicated that the President will sign the legislation.

How the homebuyer tax credit would work:

• Tax credit: Ten percent of the purchase price of a primary residence, up to a maximum of $8,000 for first-time homebuyers and $6,500 for repeat buyers who purchase between December 1, 2009 and May 1, 2010. First-time homebuyers are defined as people who have not owned a home in the previous three years. Repeat buyers must have owned their current home at least five years. The credit cannot be used for houses costing more than $800,000.
• Deadline for qualifying: Purchase agreements must be signed by April 30, 2010, and closings must be final by June 30.
• Military deadline: The deadline is extended by a year for members of the military who have served outside the U.S. for at least 90 days from Jan. 1, 2009, to May 1, 2010.
• Income limits: Individuals with annual incomes up to $125,000 and joint filers with incomes up to $225,000 qualify for the full credit. Individuals with incomes up to $145,000 and joint filers with incomes up to $245,000 qualify for reduced credits.
• How to apply: Taxpayers can claim the credit on their federal income tax returns. If the credit exceeds their tax bill, the government will issue a payment. Taxpayers who want immediate refunds can amend their tax returns for 2008 to claim the credit.
• New anti-fraud limitations imposed.
• Cost: $10.8 billion.

 Source: Bloomberg Press and Associated Press and confirmed information with the content of the Senate bill.

Call David Wolsky of PHH Home loans for further details. I can be reached at 520-275-2536.

Homebuyer’s tax credit update

There was some encouraging news on the extension of the $8000 tax credit for first time buyers. The Senate reached an agreement to extend the tax credit and added a $6500 tax credit for other primary home buyers. They also raised the qualifying income limits, in a meaningful way, increasing single taxpayer’s  income from $75,000 to $125,000 and joint taxpayer’s income from $150,000 to $250,000. Buyers must have an executed purchase agreement by April 30, 2010 and will have to close by June 30, 2010. More details are likely to come. Changes may occur in the reconciliation of the bill with the House and when voting takes place. The White House is strongly in favor of an extension of the tax credit especially for first time buyers.

 Appraisal Reforms My Be Terminated

According to Ken Harney of  The Washington Post in his recent column, the Home Valuation Code of Conduct (HVCC) could be on its way out. A bi-partisan amendment was approved October 22 by the House Financial Services Committee. The “Home Valuation Code of Conduct” would be terminated early in the existence of a proposed new Consumer Financial Protection Agency. The agency’s director would replace the code with a new procedure. The code was implemented last May as a firewall between lenders and appraisers to remove any collusion and inflated value. HVCC has created appraisal management companies which in some cases, collects fees from borrowers, pays appraisers reduced fees for their appraisals and pockets the difference. This practice has resulted in inferior quality appraisals. Some management companies hire inexperienced personal willing to work for lower fees and appraisers unfamiliar with the areas they are assigned to appraise. There have been many complaints since HVCC’s inception. In Michigan, The National Association of Home Builders contends the code is impeding new construction as well. More than half of the 500 builders who responded to a recent survey said at least one of their new homes was appraised at less than the cost of construction.  On the other hand, Freddie Mac stated on October 20^th the quality of appraisals has improved.

Personally, I think the system could use some tweaking. I have recently received low value appraisals. It has been a difficult and arduous process to get the appraisers to reconsider the values. You would think a buyer and seller agreeing to a sales price would also influence home values! I am certain we can come up with a better system that will allow independence between appraisers, Realtors, borrowers and lenders.

PHH Corporation names Jerome Selitto CEO 

An issue close me, David Wolsky. My company, PHH Mortgage hires a new CEO. Veteran Industry Leader Brings to PHH Successful Track Record of Innovation, Transformation and Value Creation in Mortgage Business

 MT. LAUREL, N.J. – October 26, 2009 – The Board of Directors of PHH Corporation (NYSE: PHH) today announced that Jerome J. Selitto has been named President and Chief Executive Officer and appointed to the Board of Directors, effective immediately.  George Kilroy, who in June had stepped in on an interim basis as Acting President and CEO of PHH, will continue to lead the company’s fleet management business and serve as a member of the company’s Board of Directors.

 Mr. Selitto brings to PHH nearly forty years of experience in the mortgage industry and in capital markets, as well as a long and successful track record of building companies that have created value by transforming key sectors of the home lending market.  Mr. Selitto served most recently as a senior consultant and then member of the senior management team of mortgage industry software provider Ellie Mae and, before that, as Chief Executive Officer of DeepGreen Financial, the groundbreaking online home equity lender that he helped found.  Earlier, he launched and helped lead mortgage insurance company Amerin Guaranty Corporation (now Radian Guaranty) and held senior leadership positions at First Chicago Corporation, PaineWebber and Kidder, Peabody & Co.

 Jim Egan, Chairman of the PHH Corporation Board of Directors said, “Jerry Selitto is an innovative leader with a proven ability to drive change in an organization and execute transformational strategies that create value for its stakeholders.  Jerry was the architect of two companies in the mortgage industry that created distinctive competitive advantages, found innovative and cost-efficient ways to serve their customers and created new opportunities to generate revenue.  We are confident that his strategic vision, leadership ability and experience re-designing corporate processes will drive increased value across our mortgage and fleet management businesses and help take PHH to a new level of success.”

 Mr. Selitto said, “I am thrilled to have the opportunity to join PHH.  This is a great company with valuable assets, talented employees, world-class clients, and significant opportunities for growth.  PHH’s mortgage and fleet management businesses are well-positioned in the marketplace, and I look forward to working closely with my colleagues across the company to create new opportunities and significant value for our shareholders, customers and employees.”

Economic Update For The Week of November 2nd 

This is a big week for economic information. The Federal Reserve Open Market Committee meets on Tuesday and their monetary policy statement is released on Wednesday. On Friday, we have the jobs report which is an important report especially with unemployment hovering around 10%. Some good news in our industry, the house and senate voted on Friday for a one year extension of higher loan limits for FHA, Fannie Mae and Freddie Mac. The limit in Pima County is $316,250 for FHA and $417,00 for Fannie and Freddie.  Expect a vote this week for an extension of the $8000 tax credit which should stimulate housing for the first quarter of 2010. Pending home sales were up 6.1% in October. It’s the eight straight month with an increase thanks in large part to the $8000 tax credit. It is a great time to be a home buyer!

 I can tell you first hand, working inside of a real estate office, the tax credit is a definite stimulus to the housing industry. Every seven seconds, another house goes into foreclosures. The inventory must be moved! There are millions of qualified buyers out there, but there is still a lot of fear, especially with those potential buyers that are afraid of losing their jobs. The tax credit is a great lure for those qualified buyers. I personally think they should extend the credit for all home buyers. There is a pent up desire for home buying, but move up buyers and investors are mostly on the sidelines. I met with an investment advisor today and he was quick to remind me that it is a great time to buy stocks when the market is low and that strategy certainly applies to the housing market. The affordability index is at its best levels in decades. With the low prices, the tax credit and record low interest rates, it is the right time to buy (and hold). Here’s more insight on the tax credit… 

From Inman News:

White House spokesman Robert Gibbs today confirmed that President Obama supports an extension of the first-time homebuyer tax credit, along with prolonging jobless benefits and health care subsidies for unemployed workers.

Briefing reporters, Gibbs said the measures don’t amount to a second stimulus plan.

Evidence of bipartisan support in the Senate for extending the first-time homebuyer tax credit was also on display Sunday on ABC’s “This Week,” with guests Sen. Charles Schumer, D-N.Y., and Sen. John Cornyn, R-Texas, finding common ground on the issue.

From the Kiplinger’s Tax Letter:

Start with the first time home buyer credit, the $8,000 break that is set to expire on Nov. 30. The credit will be extended for a few months, and lawmakers will clarify that first time purchasers don’t have to complete the sale by the expiration date to get the tax credit. They need only sign a contract. The odds are low that Congress will expand the credit to folks who aren’t first time home buyers, or increase the credit limit to $15,000.

The $8000 tax credit expires on November 30th. I would urge anyone interested in obtaining the credit to close their deal by November 15th to avoid running into the Thanksgiving holiday when title companies and the county recorder’s offices are closed typically for the weekend. I would also urge any first time buyers to stay away from short sales, because they will be difficult to close before the deadline. The current program has helped over 1.4 million people already! The credit is available to first time home-buyers or anyone who has not owned a home for at least three years. Click on www.irs.gov to answer any questions you may have regarding eligibility and to download the correct form to receive your refund. There is growing support to continue the program for at least six months, but there has been no new legislation as of this writing. There has also been some talk of expanding the tax credit to $15,000 and opening it up to all home buyers.

If you or someone you know would like to explore the possibilities, call me, David Wolsky at 520-275-2536. I can pre-approve you on the same day! You can choose between FHA,VA and conventional financing. There is also a program in Arizona to help buyers by foreclosed properties. It’s called, Your Way Home Arizona. My company, PHH Home Loans and Coldwell Banker Home Loans also offers financing for USDA Rural Housing which is a zero down program designed to help buyers in more rural settings.

FHA Logo

Special thanks to Inman News and Matt Carter for the following information:

Beginning in January, The Federal Housing Administration will tighten the credit guidelines and make rule changes the appraisal process to minimize defaults.. FHA’s insurance fund is sufficient to cover future losses, Federal Housing Commissioner David H. Stevens said, but the tighter policies will ensure that the loan guarantees remain self-sustaining and continue to be funded by premiums paid by borrowers, not taxpayers. The rule changes for appraisals will be similar to the changes implemented by Fannie Mae and Freddie Mac this past May, known as the Home Valuation Code of Conduct (HVCC). There has been some push back to HVCC by industry groups, but I suspect that it is here to stay.

Other FHA changes include new requirements for streamlined refinancing such as income verification and demonstrating a tangible benefit  to the borrowers.

There will bill tighter restrictions for FHA approved lenders that will require us to submit audited annual financial statements. Another rule change transfers the risk of loans originated by mortgage brokers to lenders who fund the loans. This practice is already in place for Fannie and Freddie. Brokers won’t have to be individually approved to originate FHA loans which will potentially increase the number of lenders eligible to provide FHA loans resulting in more effective oversight per The U.S. Department of Housing and Urban Development (HUD).

HUD also proposes to increase the net-worth requirement for approved mortgagees from $250,000 to $1 million — a move that could exclude many smaller companies from FHA lending. The requirement has not been increased since 1993 and is currently below industry standards, HUD said. The Mortgage Bankers Association (MBA) issued a statement saying it has long advocated a higher net-worth requirement for FHA lenders, but noted that it “is just as important that any new requirements be reasonable and not unduly hamper competition.” MBA has proposed a $500,000 net-worth requirements.

I have 15 years of FHA lending experience. My company, PHH Mortgage is the fourth largest lender in the country and we specialize in government loans. Call David Wolsky at 520-275-2536. We are licensed in all 50 states. Email me at david@davidwolsky.com for all your mortgage needs.