Tight-fisted mortgage lenders pressure home sales

By John W. Schoen, Senior Producer

Home prices have fallen by a third since 2006, creating tremendous bargains for home buyers. Mortgage rates are at rock-bottom lows, making houses more affordable than they have been in decades. Yet home sales last year fell to the lowest levels since the government began keeping records in 1963.

One big reason is that mortgage bankers have gotten a lot choosier about who they’ll approve for a loan, according to a report by Goldman Sachs economists Hui Shan and Jari Stehn. By some measures, they're pickier than they were before the housing boom took off.

With anecdotal evidence showing that home mortgages are harder to get, the economists crunched Federal Reserve data to show just how much tighter lending standards have become. Using the results of the Fed's survey of loan officers, the report found that lending standards rose sharply after the mortgage market collapsed and the financial system imploded in 2008. Since the recession ended in 2009, lenders haven’t eased their tight grip on mortgage money.

Part of the reason is that there’s less money available to lend. During the housing boom, as brokers produced a flood of new mortgages, Wall Street bankers churned out a torrent of mortgage-backed bonds for investors waiting to snap them up. That market has all but vanished; 90 percent of new mortgages written today are backed by the government.

The new mortgage pipeline also has slowed because it is clogged with paperwork. These days, you’ll have to fill out many more forms and produce a lot more documentation, on average, just to get your loan considered.

The percent of loans that required “full documentation” declined steadily from 2000 through 2006, hitting a low of less than 60 percent. Those “no-doc” loans were a big part of the reason mortgage bankers made the bad underwriting decisions that created the mortgage mess. Today, nearly 90 percent of mortgage applications require full documentation. That’s much higher than the pre-bubble level.

You’ll also have to show a much higher credit score than you did in the go-go days of the housing boom. In a separate report, Mortgage Marvel, an online mortgage-shopping website, analyzed data from more than 700,000 mortgage applications filed last year and found that the average FICO score was 730. That’s a significant jump from the days when borrowers with scores in the high 500s were routinely steered to high-cost subprime loans.

Applications with highest credit scores concentrated in California, Oregon, Wisconsin, District of Columbia and Hawaii, the company said. The states with the lowest credit scores were Mississippi, Arkansas, West Virginia, Louisiana and Oklahoma.

Fed says long-term inflation goal is 2%

By Steve Goldstein

WASHINGTON (MarketWatch) -- The Federal Open Market Committee said Wednesday that the long-term inflation goal is 2%, as measured by the annual change in the price index for personal consumption expenditures. That's the most explicit the Fed has been in terms of setting an inflation target. Eleven of the 17 Federal Open Market Committee participants believe a rate hike would not be appropriate before 2014, according to the first-ever rate forecasts published Wednesday. Three members want the first hike by this year, three want them in 2013, five want them in 2014, four more in 2015, and two in 2016. The Fed also forecasts GDP growth between 2.2% and 2.7% this year, an unemployment rate between 8.2% and 8.5% and PCE inflation between 1.4% and 1.8%; the growth forecast is down from November levels, as are the jobless and inflation views. The Fed sees longer-term rates reaching between 4% and 4.5%.

Responsibilities of Being the Executor of an Estate

Did you agree to be the executor of someone’s estate, and you’re not sure what you got yourself into? Or do you expect someone will ask you in the future, and you don’t know if you should say “yes”? Being an executor is much more than an honorary title, and if you take on this role, it is important to understand the duties it entails. The executor is the person named in a will who is responsible for executing it and otherwise settling the deceased person’s estate. It typically involves: Locating and inventorying the deceased person’s assets and safeguarding them until they are given to the heirs. Petitioning the court to probate the will. (Probate is the legal process of validating the will, settling debts, and transferring the assets to heirs, although some assets, such as jointly owned property and life insurance, don’t go through probate). Giving notice of the death to the deceased’s person’s creditors, financial institutions, and service providers. Paying any outstanding bills with the assets from the estate. Filing the deceased person’s last federal and state income tax return. If applicable, filing the federal and state estate tax return (only an issue for larger estates). Paying any taxes due with assets from the estate. Locating the heirs and distributing the remaining assets according to the instructions in the will. As the executor, you are not required to pay any of the estate’s liabilities out of your own pocket. However, you have a “fiduciary duty” to act in the best interest of the deceased person. If you don’t (e.g., you keep all the assets and don’t give them to the heirs), you can be held personally financially liable for your actions. How demanding the role of executor is largely depends on the estate itself. For example, if you are the only child and heir to your parents’ estate, they own very little, and have no debts, the process should be fairly painless. However, if you are one of five children, the will says that four children inherit the assets (including an ill-taken-care-of house filled with furniture from the 70s) without specifying who gets what, and there are multiple creditors, you could be dealing with a headache that won’t resolve itself for months. If you are on the fence, looking at the will can give you a good sense of how complicated settling the estate will be. Keep in mind that you can hire a professional, such an estate planning attorney, to help you. However, if you don’t feel up to the task, don’t feel guilty about saying “no”. Ultimately, the estate is best served by an executor who is fully capable and willing to carry out the deceased person’s wishes, whatever work that may entail.

30-year mortgage rate at record low 3.88%

By Ruth Mantell

WASHINGTON (MarketWatch) - The average rate on the 30-year fixed-rate mortgage ticked down to a record low of 3.88% in the week ended Jan. 19 from 3.89% in the prior week, Freddie Mac said Thursday in its weekly report. These data go back to 1971. A year ago, the 30-year rate was at 4.74%. "Mortgage rates were nearly unchanged this holiday week" amid mixed economic reports, said Frank Nothaft, Freddie's chief economist, in a statement. To obtain the latest rate, payment of an average 0.8 point was required, according to Freddie, a buyer of residential mortgages. A point is 1% of the mortgage amount, charged in prepaid interest. The 15-year fixed-rate mortgage ticked higher to 3.17% in the latest week from a record low of 3.16% in the prior week. These data go back to 1991. Meanwhile, the average rate on the 5-year Treasury-indexed hybrid adjustable-rate mortgage remained at 2.82%, matching the record low set in the prior week. These data go back to 2005. The 1-year Treasury-indexed ARM fell to a record low of 2.74% from 2.76%. These data go back to 1984.

30-year mortgage rate at record low 3.89%

30-year mortgage rate at record low 3.89%

By Ruth Mantell

WASHINGTON (MarketWatch) -- Mortgage rates have hit record lows, Freddie Mac said Thursday in its weekly report on these rates, following "mixed" labor-market indicators. The average rate on the 30-year fixed-rate mortgage fell to a record low of 3.89% in the week ended Jan. 12, compared with 3.91% in the prior week, according to Freddie, a buyer of residential mortgages. These data go back to 1971. A year ago, the 30-year rate was at 4.71%. "Although the economy added 1.6 million jobs in 2011, which was the most since 2006, the unemployment rate remained historically elevated," said Frank Nothaft, Freddie's chief economist, in a statement. To obtain the latest rate, payment of an average 0.7 point was required. A point is 1% of the mortgage amount, charged in prepaid interest. The 15-year fixed-rate mortgage fell to a record low of 3.16% in the latest week from 3.23% in the prior week. These data go back to 1991. Meanwhile, the average rate on the 5-year Treasury-indexed hybrid adjustable-rate mortgage declined to a record low of 2.82% from 2.86%. These data go back to 2005. The 1-year Treasury-indexed ARM fell to a record low of 2.76% from 2.80%. These data go back to 1984.

30-year fixed-rate mortgage at record low

Jan. 5, 2012, 10:34 a.m. EST

30-year fixed-rate mortgage at record low

Housing market showing signs of improvement, economist says

By Amy Hoak, MarketWatch

CHICAGO (MarketWatch) — Rates on 30-year fixed-rate mortgages matched a record low this week, after recent reports indicated the housing market and manufacturing industry are showing improvement, Freddie Mac’s chief economist said on Thursday.

The mortgage averaged 3.91% for the week ending Jan. 5, down from 3.95% last week and 4.77% a year ago, according to Freddie Mac’s weekly survey of conforming mortgage rates. This is the fifth week in a row that the mortgage has averaged below 4%.

Fifteen-year fixed-rate mortgages averaged 3.23% this week, down from 3.24% last week and 4.13% a year ago.

Five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 2.86%, down from 2.88% last week and 3.75% a year ago.

But 1-year Treasury-indexed ARMs rose, averaging 2.8% this week, up from 2.78% last week. The ARM averaged 3.24% a year ago.

To obtain the rates, the fixed-rate mortgages required an average 0.8 point, the 5-year ARM required an average 0.7 point and the 1-year ARM required an average 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest.

“Fixed mortgage rates started the year a little lower this week just as recent data reports indicate the housing market and manufacturing industry are showing signs of improvement,” said Frank Nothaft, vice president and chief economist of Freddie Mac, in a news release.

Pending existing home sales rose 7.3% in November, while construction spending rose 1.2% in November.  “Similarly, manufacturing expanded in December at the fastest pace in six months,” Nothaft said.

§ 

2012 looks better for real estate

2012 looks better for real estate

Experts see a bottom this year, followed by a gentle upsurge in home prices.

This post comes from Marilyn Lewis at MSN Money.

One fun part of ringing in the new year is placing bets on what it will bring. Collecting New Year predictions isn't as silly as it sounds; it gives knowledgeable players a chance to share what they know.

For those of us trying to gauge whether to sell, buy or rent in 2012, every scrap of wisdom helps. Here are predictions from a few trusted voices in real estate

 Karl Case

Case, an economist and professor emeritus at Wellesley College, is one of the nation's smartest observers of the real-estate market. The S&P/Case-Shiller Index, invented by Karl Case and Robert Shiller, "is pretty much the Dow Jones industrial average of real estate," says The New York Times.

"The 20-city composite index of home prices hit bottom in March 2011 and has improved modestly since," writes the Times in a year-end look at the economy.

Judging from the index that bears his name, the future holds nothing but more grimness for real-estate values in the U.S. "Nasty Case-Shiller shows home prices barely off their crisis lows" is how Forbes put it last week.

"But Mr. Case points out that the data masks some signs of eventual recovery," says the Times. Here's Case's assessment:

"Household formation is increasing and the vacancy rate is dropping," he said. "Housing starts are at a 60-year low, and they've been there for three years. That's unheard-of. We're starting to see some signs of an increase in value."

Diana Olick

CNBC's real-estate reporter is no economist. Olick's academic preparation consists of a BA in comparative literature and a minor in Soviet studies. But she's smart, her "Realty Check" blog keeps a sharp eye on real estate and she talks with the best analysts in the business.

Among her predictions:

·     Home prices finally hit bottom by late 2012 but not before dropping 5% more.

·     Plenty more homeowners will default on their mortgages, keeping a huge backlog of foreclosures looming over the market. (Of course a monkey with a Magic 8 Ball could have predicted this.)

·     Rents rise as demand for rentals grows.

·     Government makes no dramatic efforts to solve the housing mess.

Bloomberg

"Even the worst-hit markets will begin to see improvement by 2012," write Bloomberg real-estate reporters Prashant Gopal and Diana Holden. They, too, say prices will drop more before a turnaround begins.

Bloomberg makes predictions for home values in metro areas and each of the 50 states, including median home values predicted for 2012 and those in 2008, when the bust began, plus the percent of change expected.

Three examples:

Arizona

Metro: Phoenix-Mesa-Scottsdale
What a Home Will Be Worth in 2012: $141,859
Q4 2008 price: $169,000
Projected price change by MSA: -16.1%
Projected price change by state: -17.2%

Michigan

Metro: Warren-Troy-Farmington Hills
What a Home Will Be Worth in 2012: $157,469
Q4 2008 price: $149,000
Projected price change by MSA: +5.7%
Projected price change by state: +2.0%

New York

Metro: New York-White Plains-Wayne (N.Y.-N.J.)
What a Home Will Be Worth in 2012: $343,937
Q4 2008 price: $440,000
Projected price change by MSA: -21.8%
Projected price change by state: -15.6%

Kiplinger

The summary beneath the headline sums up Kiplinger's outlook: "The bleeding is just about over. But don't expect a speedy recovery."

Writes the magazine:

The median home price in the U.S. has plunged nearly 40% in a little over five years, but the worst is definitely over: The market has finally wrung out the last excess valuations born of the housing bubble.

Assuming no further shocks to the economy (no safe assumption, given the fragility of the world economy) U.S. real estate will slowly work its way out of the red, Kiplinger predicts.

Among experts interviewed, Mark Zandi, chief economist at Moody's, says prices will drop no more than 3% to 5% in 2012, "setting the stage for gains in 2013."

FoxBusiness

FoxBusiness interviewed John Lonski, chief economist at Moody's Capital Markets Group, who sounds bullish on housing:

"Financially strong households that have spent money at Tiffany's and on cars are afraid of putting money in housing as they don't want to arrive too early," says Lonski. "But we could be surprised at how vigorously the ensuing upturn of home sales becomes."

Tara-Nicholle Nelson

Inman News columnist Tara-Nicholle Nelson is an attorney and a real-estate agent, giving her a boots-on-the-ground perspective. She predicts:

·     Prices will recover faster in cities with thriving high-tech industries. Among them: Silicon Valley and the San Francisco Bay Area; Austin, Texas; Massachusetts suburbs of Cambridge, Newton and Framingham; Rochester, N.Y.

·     "REOs and short sales will become the new normal" as banks continue to foreclose and dispose of the backlog of homes on their hands. "Buyers will shift from considering whether to buy a short sale to understanding that they must be educated and prepared to do a deal with a seller, a bank (to buy an REO) or a hybrid of the two (to buy a short sale) to access the full selection of homes on the market."

Central bank set to change “mid-2013” guidepost on keeping rates low

Jan. 3, 2012, 2:04 p.m. EST

Fed to map out each member’s rate forecast

Central bank set to change “mid-2013” guidepost on keeping rates low

By Greg Robb, MarketWatch

WASHINGTON (MarketWatch) — The Federal Reserve has decided to shift its communication strategy to show the likely path of interest rates, according to minutes of its December 13 meeting released Tuesday.

Starting in January, the Fed will release each Federal Open Market Committee member’s individual forecasts of the appropriate level on the target federal funds rate in the fourth quarter of the current year and the new few years.

At the same time, the Fed will report when each official thinks the Fed will hike rates for the first time.

The shift in the communications strategy is designed to give more clarity to financial markets about when the Fed thinks it will tighten policy.

Fed watchers noted that there have been several instances over the past few years when the markets became convinced prematurely that a rate hike was in the offing. The resulting higher rates served only to dampen the recovery.

The Fed is still working on a statement of longer-run policy goals, the minutes showed. This could include a move to a more informal inflation target.

Federal Reserve Chairman Ben Bernanke encouraged a communications subcommittee to have a new statement ready for the FOMC to consider at its next meeting on Jan. 24-25.

In their discussion of current policy, a number of Fed officials backed more easing steps while only a few objected. The Fed members said they were likely to soon alter language about the central bank keeping rates at ultra-low levels through the middle of 2013.

Financial market uneasiness due to the European debt crisis was seen as a key downside risk to the outlook, the minutes showed.

The Fed staff trimmed its growth outlook due to developments in Europe, the minutes showed.