Shadow Inventory - to Wreck Havoc Soon!
Posted on April 13, 2009
Filed Under Foreclosures | 1 Comment
Shadow Inventory is a term that refers to unsold foreclosures. These are homes being held back from the foreclosing bank and not yet placed on the market for sale. No one really knows how large the problem is the banks and the public are facing.
There are various statistics available from DataQuick, RealtyTrac and also ForeclosureRadar. In the San Francisco Bay Area 9 Counties it is estimated approx. 35% or more of foreclosed homes have not been listed for sale yet - representing approx. 20,000 homes and possibly as high as 100,000 homes. It is possible that a similar trend is happening in the Vancouver - Portland area. Perhaps not quite as severe, however.
There are several speculative reasons for this “shadow inventory of unsold bank owned homes”. The system may be overwhelmed by the amount of homes on the books that need to be processed for resale. The banks may be holding bank on listing too many for sale - preventing a free fall of home prices. The banks may be holding back to create an illusion that their balance sheets aren’t as bad as they really are.
In addition to this shadow inventory there is another huge wave of foreclosures to hit the market. These are homes that have been placed under a moratorium which halted the foreclosure process in order to try work out’s with the homeowners via loan modifications of various types. In essense this will be a wave upon another wave.. or 2 waves back to back.. whichever way you want to look at it.
Here is a quote by Patrick Newport, a U.S. Economist with Global Insight - a Mass. research firm:
“The problem is that no one knows how extensive (the shadow inventory) is,” “It’s a wild card. If it’s a really big number, you’ll see prices drop a lot more and deeper problems for the financial system.”
FHA the loan of choice amongst majority of buyers
Posted on April 1, 2009
Filed Under FHA Home Loans | Leave a Comment
FHA has become the loan of choice. A high percentage of new purchase loans are being issued by FHA lenders. The main reasons being they allow a lower fico score than conventional loans and the down payment is only 3.5%. + The seller can contribute up to 5% towards closing costs.
On the other hand it is causing a new problem. The deliquency ratio of FHA loans has increased causing many people to believe this may be considered the new “sub prime”. By not requiring buyers to put down sizable amounts to purchase their home it brings into question the viability of the borrower. Perhaps this is why we are seeing minimum fico score requirements on the rise.
Case Shiller Housing Report paints Gloomy Picture of Falling Home Prices
Posted on April 1, 2009
Filed Under Short Sales, Foreclosures | Leave a Comment
Case Shiller Home Price Index is a leading information source for what is going on in the housing market. The January report shows that sales prices across the nation continue to decline.
While the low interest rates and low prices are bringing many buyers to the market in search of bargain prices there appears to still be more downside for home sellers.
What does that mean to real estate agents? I means they will need to price their listings below the current market value. Since it could take 2 -3 months for a short sale approval it would be wise to determine the month over month decline percentage in your area and multiply that by let’s say 3 months..So, if your area is declining at 12% a year you may want to reduce your list price by 3% from recent comps.
This, of course, is not an exact science but it is a start in the right direction.
We Buy Houses
Posted on January 24, 2009
Filed Under Homes for Sale, Home Sellers | 2 Comments
We Buy Houses!
Nationwide Foreclosure Filings
At An All Time High
Learn What You Can Do
If You are Facing Foreclosure!
USDA 102% Rural Housing Loan
Posted on January 6, 2009
Filed Under Home Loans, Homebuyers | 5 Comments
102% USDA Home Loan Program
(*Rural Development Loan, Rural Home Loan, USDA Loan, Rural Development Guaranteed Rural Housing, Rural Housing Loan)
Benefits:
- 102% financing based on appraised value - rather than based on purchase price. (could allow a certain amount to be financed toward home repairs)
- 30 Year Fixed Rate Mortgage
- Refinance: Yes - rate reduction only - no cash back. Only GRH and 502 direct loans)
- MI - No monthly mortgage insurance. Upfront guarantee fee of 2%.
- Reserves: No payment reserves
- Downpayment: No down payment
- First Time Homebuyer - No first time home buyer requirement
- Seller Concessions - No Maximum - over 6% requires comment from appraiser
- Gifts - 100% gifting permitted. Donor must be disinterested third party
Debt to Income Ratio
- Ratios - 29/41 - exceptions encouraged with compensating factors and RD concurrence
- Non-occupant Co-borrower: Non-occupent co-borrowers not permitted unless approved by RD
- Installment Debt - Include all installment debt greater than 6 months
- Primary Income - Two-year history
- Self-employment - Two years 1040’s and P&L
- Alimony/child support - 12 month history with proof of 3 years continuance
- Part time, Overtime & Bonus - 12 month history
- Disability benefits - Benefits letter, 3 years continuance and gross up 125%
- SSI benefits - Awards letter or 2 months bank statements, 3 years continuance and gross up 125%
- Salary increases - Salary increases within 60 days of the first payment due date are acceptable
- Maximum Income - US RD Moderate Income Limits
Credit
Credit Score - No minimum credit scores
Late payments - 1 x 30 permitted in last 12 months with explanations - Exceptions may be granted with 620 or greater middle credit scores
Bankruptcy / Foreclosure - Chapter 7 and 13 must be discharged for 3 years - Foreclosures must be completed 3 years ago - exceptions may be granted with 620 or greater middle credit scores.
Collections - Accounts cannot have been placed in collection status within the last 12 months - Exceptions may be granted with 620 or greater middle fico scores.
Judgements - Must be paid off for at least 12 months - Exceptions may be granted with 620 or greater middle fico scores.
Verification of Rent - If middle credit score is lower than 620 a VOR is required for the most recent 12 months.
Previous Housing Payment - not required
Non-traditional credit - Acceptable if no credit is available
Credit report - RMCR or Tri-Bureau merged
Homebuyer education - Case by case or when required by RD
*various terms are used in reference to the 102% USDA Home Loan, however, the loan referenced in this post is the 102% usda loan by the USDA - Rural Development Guaranteed Rural Housing Home Loan Program.
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