Changes to HAFA:

- Short sale answers must come within 30 days
- Servicers are no longer required to verify a borrower’s financial information
- Servicers are no longer required to determine if the debt-to-income exceeds 31%
- Second lien holders no longer must accept 6% of the unpaid balance.

The goal of these changes is to expedite short sales, which is good news for home owners, realtors, investors and ultimately the banks.

As always, www.sellmyhouse.com will stay on top of the results for our Realtor and investor networks.

The www.SellMyhouse.com Team

Last week Diana Olick of CNBC interviewed an investor who buys foreclosed properties and rents them out long-term for solid returns. He claims that’s the only way to right the housing market — get long-term investors to eat up the excess inventory. The biggest roadblock, however, is credit. Fannie Mae and Freddie Mac both limit the number of investor mortgages.

Fuse | Getty Images

Multiple sources now tell me that the Administration, specifically over at the Department of Housing and Urban Development, is considering ways to get more investors into the housing market, possibly with the help of Fannie and Freddie. HUD would not confirm that, but Fannie Mae’s chief economist Doug Duncan said it is definitely on the table both at HUD and at Fannie.

“We’re certainly exploring the opportunities to expand that,” said Duncan in an interview, cautioning, “the data in our own portfolio show that when you get to a certain number, like ten is the number we’ve chosen, if there’s any default issue, all the loans go bad at the same time, so at the present time we have two mandates, one is to help provide liquidity and help with funding, but the second is to protect taxpayers as well.”

No question that any such program would have to require investors to have significant skin in the game, that is, large down payments on all properties, and perhaps a designated capital reserve level to protect against losses. Underwriting would have to be stringent, unlike what went on in the heyday of the housing boom.

Part of the problem is that the Administration doesn’t want to spend any more money on housing, and it is particularly politically unpalatable to offer financial assistance to investors, who are widely blamed for causing the housing crisis in the first place. But we’re talking about a different kind of investor here. There is an awful lot of hedge fund capital just sitting on the sidelines, if and only if the banks would let them on the field.

With home prices falling yet again, a collective $1.7 trillion of collective home equity lost in 2010, according to Zillow.com, and mortgage rates rising, more potential home buyers are being priced out of the housing market. 23 percent of borrowers are now underwater on their mortgages, which means they can’t sell to move up. Inventories are still far above a healthy level, and the shadow inventory of foreclosed properties will only add pressure to prices. I’m sure the Administration is well aware of all that, which is why officials are putting ever more pressure on Fannie and Freddie to write down mortgage principal.

“The Administration believes strongly that the FHA short refi [which involves principal write-down] is a viable option to deal with borrowers with negative equity, and outright refusal to implement a program which could have economic value to the institutions bearing the risk, we think is shortsighted,” FHA commissioner David Stevens told me.

Whether it’s principal write-down or investor incentives, it is becoming ever more abundantly clear that the housing market is not going to right itself on its own without considerably more pain.

The www.SellMyHouse.com Team

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While not unexpected, the unceasing declines in home values signal that we’re in for a long, bleak winter of continued troubles for the housing market. The length and depth of the current housing recession is rivaling the Great Depression’s real estate downturn, and, with encouraging signs fading, will easily eclipse it in the coming months.

Humphries also said the number of foreclosures reached a new all-time high and that the number of homeowners under water on their loan has now reached 23% – a high this year. Humphries is not optimistic:

The high percentage of homeowners in negative equity continues to be troubling, in that it represents a huge number of people who are not only more vulnerable to foreclosure, but who are essentially trapped in their current homes and are prevented from selling and buying a new home. This has profound implications for future demand and will be a millstone around the neck of the housing market.

The housing market is playing out almost exactly as I’ve expected in recent years. This still remains a simple supply and demand story. The overhang of inventory is crushing meager demand and the mortgage mess isn’t helping matters as shadow inventory is pushed further into the future. If you thought the housing crisis in the USA was behind us you might want to think again. Housing was the domino that set the credit crisis in motion in 2007 and it could pose a very serious risk in 2011.

Source: Zillow

However, the real scary issue is relayed in a recent Charlie Rose interview with housing expert Robert Shiller:

Charlie Rose: You’ve said that 90% of the housing market is supported by the government.
Robert Shiller: Well, it’s 80% or 90%. Really almost the whole market now is government. And we know this can’t last.

Rose: And that means prices are being artificially inflated?
Shiller: It seems to. Government support is especially prominent in sales of existing homes, which shot up to over 6 million on an annual rate in November 2009, the month that the home buyer tax credit initially was supposed to expire.

Fannie Mae has reported the rate of serious delinquencies (90 Days overdue) for conventional loans in its single-family guarantee business jolted to to 5.52% in January from 5.38% in December. This is a 100% increase since January 2009. But look at the chart below and explain to me how we are anywhere near an end to this housing crisis!

It is our stance that we still have some real issues to work thru before we can claim “an end to the housing crisis”.

Jason Roberts

Founder & CEO

www.SellMyHouse.com

Banks and other lenders would have to reduce the payments to no more than 31 percent of a borrower’s income, which would typically be the amount of unemployment insurance, for three to six months. In some cases lenders may allow a borrower to skip payments altogether.

Haven’t we been through this already with the loan modification programs of the past year? Less than 200,000 permanent loan modifications have been secured since the program was enacted.

The new wrinkle will be the administrations push to deal directly with the massive number of mortgages that are ‘underwater’. They could offer financial incentives for the first time to lenders to cut the loan balances of such distressed homeowners. Those who are still current on their mortgages could get the chance to refinance on better terms into loans backed by the FHA.

I do think this could help stop people from walking away just because it is underwater who can actually afford their house payment. However, as a general thought, it feels a lot like just one more government attempt to help boost numbers thru the remainder of the year so that we can get past the elections.

Lets be honest, government attempts to resolve the housing crisis have been a miserable failure. More importantly, it has strapped the tax payer with a debt level that has never been seen in this country’s history. That will have a much longer negative effect on the housing market than the false boost we have been given from the tax credit offered.  Despite billions of dollars in government incentives, home sales and new construction totals are sinking, not expanding. 

The truth, as hard is it may be to accept, is that this is a supply and demand issue. Until supply is worked thru, the housing market will not recover substantially. The foreclosure inventory has to be taken out of the system. New home builds will not recover until ‘cheap’ houses are not an option to purchase. Who in their right mind would pay $300,000 for a new house when they can buy a similar house with more square footage that is only a few years old for half of that total?

Existing house values rise as a direct result of new home construction. New housing construction has also proven to be a leading indicator for an overall economic recovery.

To me it is pretty simple, we fix the problem by expediting the foreclosure inventory thru the system as quickly as possible. Until that excess inventory is removed from the system, the housing market will not recover. HAMP and other government programs will just drag out the inevitable supply and demand issue.

I wrote an article last fall discussing my ideas on how to fix the problem. I’ve been in countless board room and conference call discussions with industry leaders about this very thing. I’m still convinced to this day that dealing with supply will ultimately resolve the demand issue, and event he economic problems we face.

Jason K Roberts

CEO

www.SellMyHouse.com

Enjoy:

Part 1

Part 2

Part 3

Please chime in!

www.SellMyHouse.com Staff Writter

24% of houses with a mortgage are now underwater, over 11 million in total. Another 2.3 million are within 5% of a negative equity position.

Highlights of the report:

“Negative equity continues to be concentrated in five states: Nevada , which had the highest percentage negative equity with 70 percent of all of its mortgaged properties underwater, followed by Arizona (51 percent), Florida (48 percent), Michigan (39 percent) and California (35 percent).

We can use our houses as piggy banks when the market it dropping. www.SellMyHouse.com has seen estimates that predict houses could drop another 15% from current levels….or 50% from 2006 valuations.

Hope not but time will tell.

www.SellMyHouse.com Staff Writer