PASSING the debt ceiling gives us more breathing room and time to recover and bounce back from this current recession.
I have been very worried about all this is going on, to really start falling apart and in finding out what changes are to be made the year before a very big election year coming. What I am worried about is, of course, the bad in our current economy.
The US homeownership rate in the second quarter dropped to its lowest level in 13 years, according to the Census Bureau, with analysts expecting even more drops ahead.
The homeownership rate fell to 65.9%, down one percentage point from a year ago. It’s the lowest level measured since the first quarter of 1998. Analysts at Capital Economics said this means the homeownership rate built during the housing boom has been “completely wiped out” by its bust.
“The poor economic climate, the double dip in house prices, the high number of foreclosures and tight credit conditions are all reasons why the homeownership rate will continue to fall,” analysts said.
Homeownership for younger consumers has become even more sparse. According to the Census Bureau, the rate among Americans younger than 35 years old dropped to 37.5% from 39% one year ago. This, analysts said, is a sign credit has tightened for younger consumers. With unemployment elevated for this cohort, as well, the rate could continue to fall in coming quarters.
“With another 3 million foreclosures in the pipeline and no sign of a major improvement in credit conditions or the labor market, demand for owner-occupied housing is likely to remain weak for some years yet,” Capital Economics analysts said.
Yikes, that is the ugly. Let’s see what is the bad news.
Due to the recent agreement to raise the debt limit there are small signs of rate easing due to market rallying for the increase in our debt limit. However, don’t bring out your party favors yet. This will cause Treasury and mortgage bond yields to fluctuate considerably over the next few months, adding even more uncertainty to an already fragile mortgage and housing market. Mortgage and consumer rates will have to start to go up and I believe this is the better of both evils.
Now, lets see what good might come out from under all these negotiations.
Assured Guaranty proposed raising the cap of loan modifications on a mortgage trust issued in 2007 from 5% to 25% of the original pool balance.
Mortgage servicers modified between 10% and 15% of all private-label loans originated between 2005 and 2007, according to Barclays Capital.
More than 25% of these loans were subprime and 10% considered option ARMs. While analysts expect more current modifications to perform better than earlier ones, they anticipate a redefault rate between 50% to 60% on subprime modifications..
More good news
Mortgage Insurance Companies of America, a trade group that advocates for private mortgage insurers, released its recommendations on how the qualified residential mortgage rule should be drafted to include private mortgage insurance as an exception to a rigid 20% down payment.
Under guidelines created within the scope of the Dodd-Frank Act, any mortgage meeting the QRM rule can be securitized without the lending facility retaining a 5% credit risk. But MICA and mortgage insurers have been arguing for months that the 20% down payment rule is too strict and erases the potential for borrowers to enter the market with lower down payments and the backing of mortgage insurance.
MICA sent regulators their opinion on how to draft the QRM Monday, suggesting the QRM definition should include mortgage insurance and underwriting criteria that would require debt-to-income ratios up to 45% and loan-to-value ratios topped off at 97%.
Bottom line is they are fighting for more leniency in our underwriting guidelines, which I believe will happen. I also believe that the lenders will have to be more open to helping more homeowners go through the modification process in order to keep homeowners at their homes.
Best news : New Short Sale Law effective Immediately
In a major victory for REALTORS, Governor Brown signed into law a C.A.R.-sponsored bill, Senate Bill 458, prohibiting a deficiency after a short sale for one-to-four residential units, regardless of whether the lender is a senior or junior lienholder. Effective immediately for transactions closing escrow from this day forward, both senior and junior lienholders cannot require a borrower to owe or pay for a deficiency in a short sale. This law also prohibits any deficiency judgment to be requested or rendered for senior or junior liens after a short sale of one-to-four residential units. Any purported waiver of this rule shall be void and against public policy.
Although a lender cannot require a borrower to pay any additional compensation in exchange for a short sale approval, the new law does not prohibit a borrower from voluntarily offering a monetary contribution to a lender in hopes of obtaining a short sale. A lender is also permitted under the new law to negotiate for a contribution from someone other than the borrower, such as other lenders, agents, relatives, and the like.
Exceptions to the new law include a lender seeking damages for a borrower’s fraud or waste; a borrower that is a corporation, LLC, limited partnership, or political subdivision of the state; a lien secured by a bond as specified; a public utility lien; and additional rules apply if a note is cross-collateralized by more than one property.
Please go on this website to get more information and talk to your lenders if they are threatening you with a deficiency.
Thanks for your messages and support, good luck.
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Please call Ken Go of 1st Innovative Finance for your future home mortgage and Real Estate needs. Call (562)508-7048 or write to This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
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