INFORMATION & RESOURCES

ARTICLES FOR BUYERS & SELLERS

Confidence in value of homeownership persists through bust, survey shows
By Alejandro Lazo, Los Angeles Times
April 12, 2011

The real estate bust appears to have done little to alter Americans' confidence in the investment value of homeownership.
A robust 81% of adults said buying a home is the best long-term investment a person can make, according to a national survey by the Pew Research Center in Washington.

"Owning a home is really a part of the American dream, and that is just part of the American psyche and something that people aspire to," said Kim Parker, associate director for the center and one of the study's authors.
The study's results were unexpected, given the deep plunge in home prices and the fallout from the mortgage crisis, she said. Homeownership topped the list of long-term financial goals for Americans, according to the study; respondents rated homeownership, as well as living comfortably in retirement, more important than sending children to college or leaving offspring an inheritance.

The public's faith in real estate has been bruised since the last time a comparable survey asked people about the wisdom of investing in real estate. A total of 37% of respondents said they "strongly agree" that homeownership is the best investment a person can make while 44% said they "somewhat agree." The same question was
asked by a CBS News/New York Times survey in 1991, and at that time 49% "strongly agreed" and 35% "somewhat agreed."

"The study results are surprising in that so many households still believe that homeownership is a good investment, even after the plunge in home values that has occurred over the past couple of years," said Celia Chen, a housing economist for Moody's Economy.com. "The preference for homeownership has deep roots in the history of this nation, and apparently even a severe correction in house prices can shake American's belief in homeownership only slightly."

The telephone survey was comprised of a nationally representative sample of 2,142 adults conducted from March 15 to March 29 by Princeton Survey Research Associates International. Interviews were done in English and Spanish. The margin of sampling error for the data is plus or minus 2.7%.
While home prices have entered a renewed decline after showing some improvements last year, many economists believe that the worst of the housing crisis is probably over. That sentiment could help to explain the resiliency in Americans' optimism."People may have the feeling that the worst is behind us," Parker said.

Though other investments such as stocks tend to produce a better return, the housing market has generally avoided the wild swings that the stock market has over time, potentially helping to explain real estate's lasting allure, Parker added.

Homeowners in the surveywere more positive about the financial wisdom of owning a home than were renters. But even among renters, the desire for homeownership remains strong, according to the survey's findings. Just 24% of renters surveyed said they rent out of choice and 81% said they would like to buy.

The decline in values has struck a wide swath of Americans. About half, or 47%, of homeowners said their property is now worth less than when the recession began, and 31% said the value of their home has not improved. Just 17% said their home is worth more than before the recession.
Of those who said their properties have lost value, 86% said they expect it to take at least three years for values to recover, 42% said at least six years and 10% said they expect a recovery in 10 years or more.
Despite those sentiments, 82% of homeowners who indicated their home is worth less than before the recession said homeownership is the best long-term investment a person can make.

"Offers that Stick" written by Elyyse Umlauf-Garneau

Click Here to View PDF

Housing Scene: Home purchase negotiations shouldn't end at price Haggling over other contract terms offers rewards for both sides.
May 16, 2010|By Lew Sichelman

Buyers and sellers who haggle over price alone could be leaving a lot on the table.

The purchase price is only one part of the transaction. Everything in a real-estate deal is open to negotiation, and sometimes price isn't the most important factor.

A buyer might be willing to pay a little more to move into the house within 30 days, for example, instead of waiting until the seller finds another place to live. Similarly, a seller might take less if he could stay longer.

Which appliances stay with the house can sometimes be a sticking point that makes or breaks a deal. Whether or not the seller will help pay the buyer's closing costs is another. If the seller provides a so-called "warranty" is another.

Here are some of the bargaining points each side should consider:

• Earnest money. Buyers are usually asked to attach a check to an offer. But such a deposit also can be used to compensate the seller if the purchaser withdraws from the deal without a legally suitable reason.

Consequently, the seller should seek as large a deposit as possible. It may provide some bargaining room later if you need it. And besides, you can always go lower if a good offer presents itself.

If the closing is set far into the future — say, anywhere from three to six months — you might want to demand an even larger deposit because your home will, in effect, be off the market for that prolonged period.

Buyers, on the other hand, want to be certain the full return of the deposit is tied to contingencies in the contract.

• Financing. Unless they are for all cash, almost all offers are predicated upon the buyer's ability to secure funding. But the seller should be certain the financing contingency is based on reasonable economic conditions.

A financing clause is usually in two parts: 1) that the buyer secures funding within a certain number of days and 2) that the mortgage rate will be no more than a certain percentage. In each instance, your agent should be able to advise you about what is reasonable for current economic conditions.

But seller beware: Make sure that the buyer applies for a mortgage right away so that if he can't qualify, the house can be put back on the market without too much time being lost. Consequently, the timing portion of this condition shouldn't be too long, certainly no longer than a few weeks at the most.

Lenders likely to order second, last-minute credit report before closing on a mortgage

Changes taking effect June 1 are part of Fannie Mae's 'loan quality initiative' to cut down on slipshod underwriting and fraud by borrowers.

By Kenneth R. Harney

May 16, 2010

Reporting from Washington

If you're thinking about applying for a home mortgage this year, here's some important news: Beginning June 1, your lender is likely to order a second full credit screening immediately before closing.

The last-minute credit report will be designed to find out whether you've obtained — or even shopped for — new debt between the date of your loan application and the closing. If you've made applications for credit of any type — for furnishings and appliances for the new house, a car, landscaping, a home equity line, a new credit card — the closing could be put on hold pending additional research by the lender.

If you've taken out new loans that are sizable enough to affect the debt-to-income ratio calculations used in your original mortgage approval, the deal could fall through. The added debt load could render you ineligible for the mortgage because you suddenly appear unable to handle the payments without a strain on your household budget.

The June 1 changes are part of a new effort by mortgage giant Fannie Mae to cut down on slipshod underwriting by lenders and frauds by borrowers. Fannie's so-called "loan quality initiative" will require lenders not only to pull two credit reports for each mortgage transaction but to perform additional verifications of borrower occupancy plans for the property, Social Security numbers and Individual Taxpayer Identification Numbers, among other changes.

"There's an almost irresistible urge" for many mortgage borrowers to spend, said Don Unger, chief executive of Advantage Credit Inc. of Evergreen, Colo. "The lender says, 'OK, you're approved for the loan,' and you immediately think about shopping for all the things you need for the house."

Borrowers may go to a retailer and put in a credit application. In the past, that might not have raised an eyebrow, or even been detected. But under the new double-check policy, when the application shows up as a "hard" or borrower-initiated inquiry on a credit report, Unger said, the lender is going to have to contact the merchant and determine whether credit was extended, in what amount and how this might affect the applicant's home-financing transaction.

Marc Savitt, president of the National Assn. of Independent Housing Professionals and a mortgage broker in Martinsburg, W.Va., says it's not an uncommon scenario. "Most often the new debt involves furniture or other goods for the house," Savitt said. "However, we have seen debt for new cars and other major purchases."

Terry Clemans, executive director of the National Credit Reporting Assn., recalls one case where home buyers "went out and gorged on $40,000 worth of new furniture and all types of stuff" after their loan approval — resulting in monthly payments far beyond what they could afford. Under the new policy, they'd probably be shot down before closing.

Fannie Mae spokesperson Janis Smith said lenders "will have to look for things like new credit accounts, increased credit lines, increased balances on existing accounts, undisclosed or newly recorded liens, second mortgages — anything that may have changed since initial application that might impact a borrower's debt-to-income ratio."

As a practical matter, some lenders are likely to ask their credit-reporting vendors to perform the investigations when new debts or inquiries pop up on borrowers' files. Fannie Mae's instructions say that "lenders must determine that all debts of the borrower incurred or closed up to and concurrent with the closing" are considered in the final loan analysis.

Unger, however, said all this may not be as straightforward as it sounds. For example, if the credit report is pulled immediately before closing to comply with the "up to and concurrent" requirement, there may not be sufficient time to check out inquiries — especially those where no actual drawdown of debt has been reported to the national credit bureaus. He also questioned whether entire loan packages might need to be re-underwritten — a time-consuming process — based on credit data discovered at the 11th hour.

How should home buyers and refinancers prepare for the new credit-check procedures? Lenders and credit reporting company executives say everybody needs to follow just one basic rule: abstinence. Between your application for a mortgage and the date of closing — which might be a span of 45 to 60 days or more — resist spending.

And don't apply for new credit unless you discuss it in advance with your lender and get a green light.

kenharney@earthlink.net

Shopping for a loan? A good-faith estimate will protect you

February 28, 2010 By Kenneth R. Harney
Reporting from Washington — If you plan to take out a mortgage or refinance any time soon, you might want to hear this blunt message from federal officials: Don't fly blind. When you're shopping among competing lenders for the best loan terms and fees, make sure you know which quotes come with a guarantee and which do not.

Depending upon how loan officers provide their quotes upfront -- on an informal "work sheet" that carries no federal consumer protections or on a new, three-page "good-faith estimate" mortgage shopping tool that comes with rock-hard guarantees -- there could be a world of difference.

A loan officer might quote you fees that are low-balled by hundreds of dollars on an informal work sheet to get your business. But if the quotes are made on a good-faith estimate, they've got to be accurate because, under federal rules that took effect Jan. 1, any significant excesses must come out of the lender's own wallet at closing.

This month the Department of Housing and Urban Development brought together representatives of the highest-volume mortgage lenders in the country -- who originate a combined 80%-plus of all new home loans -- to review the agency's reformed good-faith-estimate and closing documents.

Among the issues discussed: the widespread use of informal work-sheet estimates to quote loan shoppers mortgage rates and closing fees. HUD does not object to lenders using work sheets to give casual shoppers a rough idea of what they'll pay. But the agency says it wants lenders and loan officers to make clear to customers that work sheets are not good-faith estimates, and they are not guaranteed.

At the meeting with major lenders, HUD Deputy Assistant Secretary Vicki Bott warned that under no circumstances can work-sheet quotes be issued to a mortgage applicant "in lieu of a GFE." Once a consumer supplies the essential application information -- Social Security number, property address and estimated value, among other data -- lenders must issue a binding-cost good-faith estimate.

Also, loan officers cannot refuse to provide a good-faith estimate to an applicant who requests one, nor can they tell applicants that they can receive a GFE only if they commit to moving forward with their company to obtain the mortgage.

"By no means can they say you are bound to me as your lender" following issuance of a cost-guaranteed good-faith estimate, Bott said. Why? Because the whole concept of the revised GFE is to enable home buyers and refinancers to shop intelligently, with confidence in lenders' estimates.

You can now get cost-guaranteed quotes on a good-faith estimate from one lender, then take them and compare them with GFE quotes from competitors. The new form contains itemized boxes allowing comparison of up to four lenders' quotes -- including interest rates, loan fees, prepayment penalties and total settlement expenses.

The good-faith estimate also ties upfront estimates to later charges at closing, and encourages borrowers to check line by line for any discrepancies. The form explains which fees come with zero tolerance for changes between upfront estimates and closing -- generally the lender's own loan fees and local transfer taxes -- and which fees allow a 10% tolerance for changes higher than the estimate, such as certain title and closing-related services.

Here is how to be a smart mortgage shopper using the new federal rules to your advantage. If you are seriously looking for the best deal and are prepared to supply basic application information, ask for a good-faith estimate by name. If you're merely shopping for generic rate quotes, work sheets are fine as long as you understand their limitations.

Beware of look-alike ploys and substitutes. Bott told lenders to make sure their work sheets do not "look like a GFE" and that they "be clear [to the consumer] that they are not GFEs."

Some work sheets that have been used by lenders since Jan. 1 resemble good-faith estimates but have titles such as "estimated settlement costs" at the top of the page. Others indicate on the bottom of the form that the work sheet "is not a GFE," but the typeface is so small it's barely legible.

Finally, be aware that federal law requires that a good-faith estimate be issued within three days of any application.

kenharney@earthlink.net

Distributed by the Washington Post Writers Group.

*Article Compliments of LA Times

New federal rules protecting applicants for home loans take effect July 30

The Federal Reserve regulations require lenders to provide consumers with initial disclosures of their mortgage costs within three business days of their loan applications, among other changes.

By Kenneth R. Harney
Washington Post Writers Group
July 19, 2009

Reporting from Washington -- If you're applying for a loan to buy a primary or secondary home, or planning to refinance, you should be aware of a little-publicized set of federal consumer-protection rules that take effect July 30.

Among other key changes, the new Federal Reserve regulations require lenders to provide you with initial disclosures of your estimated mortgage costs within three business days of your loan application. If you don't get them, you can pull the plug.

This means no more out-of-pocket upfront application charges until you've received the truth-in-lending disclosures and an annual percentage rate (APR) calculation of those loan costs.

Because many mortgage brokers and lenders traditionally have collected fees covering appraisal, credit and various other charges at the time of application -- sometimes amounting to hundreds of dollars -- this will be a significant change in procedure for the lending industry.

The rules also prohibit quickie closings on loans by requiring a seven-day waiting period after applicants are handed their early disclosures or the disclosures are mailed. You'll have a week to think about the transaction and decide whether it's right for you. Final truth-in-lending disclosures are due three business days before closing.

Here's an even more sweeping change for applications on or after July 30: The new Fed rules require lenders to deliver a copy of the real estate appraisal to you three business days before the scheduled closing on the loan.

In the past, even though federal regulations guaranteed that consumers could request and obtain a copy of the appraisal, lenders and home buyers frequently ignored that right. Many consumers had no knowledge of this right because no one in the home purchase, financing or settlement process told them about it.

Now the timing of the loan closing -- which is the financial ballgame for loan officers, realty agents, title and escrow officials -- will depend upon your receipt of the appraisal in advance. The three-day rule can be waived if you don't think receiving the appraisal is necessary.

Another significant change under the new rules: If the APR on the early truth-in-lending disclosure increases by more than one-eighth of a percentage point (0.125), the lender will now be required to "redisclose" -- that is, provide you with a corrected version and allow you an additional seven business days to consider the transaction before settlement.

What might cause the APR to increase after the initial disclosure? Lots of things: Say you left your initial rate on the loan to float with the market, but rates increase.

You'll need to get an amended truth-in-lending disclosure. Or perhaps the lender got inaccurate estimates of costs from third-party participants in the transaction, such as the settlement or escrow company. Or say that unexpected eleventh-hour junk fees materialize.

All these events, which have been frequent sources of consumer complaints this decade, could force the lender to redisclose loan costs and set back timing for the settlement.

What are some of the likely repercussions of the Fed's new mandates? First, the traditional approach of aiming in advance for a date-certain settlement target for home loan transactions almost certainly will be affected.

Closing dates will be more closely tied to lenders' and settlement agents' accurate estimates and their ability to deliver disclosures and appraisals by the required dates. If appraisers are backlogged and can't produce valuation reports quickly, settlements will have to be delayed.

Second, the purposes of the rules are to afford consumers better access to, and more time to consider, key elements of what are major financial transactions for most people. There might be fewer instances of last-minute closing-date surprises on fees, where buyers are slammed with hundreds of dollars of charges they'd never expected. But nobody can say that for sure.

Finally, the rules may well trigger waves of litigation if lenders and their business partners are not scrupulous in their compliance. There is an active and aggressive segment of the legal profession that specializes in going after banks and mortgage companies for truth-in-lending violations. Don't be surprised if you hear of lawsuits seeking cancellation of mortgage deals because timing deadlines were not met or appraisals not received.

As David Berenbaum, executive vice president of the National Community Reinvestment Coalition, put it in an e-mail comment: "Consumer advocates will closely monitor" compliance with the new Fed regulations, and the lending industry can expect "civil litigation against bad actors."

Mortgage Calculator


Yahoo! Communities
Search Yahoo! neighborhood profiles!


National Center For Education Stats
NCES is the primary federal entity for collecting and analyzing data that are related to education in the United States and other nations.


SchoolMatters.com
SchoolMatters.com is your objective source of school information on elementary, middle and high schools.