Saturday, February 26, 2005

Midwest real estate sales climb

Condo demand remains high in Chicago

Illinois, single-family home sales for January totaled 6,247, up 1.7 percent from 6,144 sales reported in January 2004, according to the Illinois Association of Realtors.

The median price of a single-family Illinois home in January was $179,400, up 8.7 percent from $165,000 in January 2004. The median is a typical market price where half the homes sold for more, half sold for less. The average home price registered $223,800 in January 2005, up 3.5 percent from $216,200 in the same month of 2004.

A total of 2,920 condominium sales were reported last month in Illinois, up 22.7 percent from 2,379 sales in the same month last year. The statewide condominium median price for January was $195,000, up 8.3 percent from $180,000 one year ago.

In the Chicagoland Primary Metropolitan Statistical Area (PMSA), single-family home sales totaled 4,085, up 3.7 percent from 3,939 home sales in January 2004. The median single-family home price for the Chicagoland PMSA last month was $234,000 up 7.8 percent from $217,000 in January 2004.

Condominium sales in the Chicagoland PMSA rose 23.1 percent in January to 2,843 units sold, while the condominium median sales price increased 8.5 percent to $197,000. In January 2004 condo sales for the Chicagoland PMSA were 2,310; the median price was $181,500.

"The Chicagoland housing market does not seem to be slowing down and condo sales continue to be a driving force," said John Veneris, president of the Illinois Association of Realtors. "The outlook for interest rates looks favorable in 2005, averaging 6 percent, according to economists for the National Association of Realtors. That bodes well for housing."


Thursday, February 24, 2005

New rule would force Fannie, Freddie to report possible fraud to regulator

The Office of Federal Housing Enterprise Oversight (OFHEO) is proposing a regulation to require Fannie Mae and Freddie Mac to report mortgage fraud or possible mortgage fraud to OFHEO in a timely fashion.

The regulation also would require the mortgage finance companies to establish internal controls, procedures and training programs to detect and report mortgage fraud.

"This rule will ensure that Fannie Mae and Freddie Mac do their part to help combat mortgage fraud," said Armando Falcon Jr., OFHEO director. "The enterprises will now have a clear obligation to report fraud and help prevent a repeat of cases like the First Beneficial matter," Falcon said.

Mortgage fraud is rampant in the United States and can cost lenders and consumers millions of dollars. Perpetrators often use sophisticated rings of professionals to bilk lenders out of money. The crimes can take years to investigate.

The rule, which is open for public comment, states that Fannie and Freddie must notify OFHEO if either company is requiring the repurchase of a mortgage backed security or other instrument, or if it is declining to purchase an instrument because of suspected fraud. The proposed rule cites recent examples of fraud or alleged fraud involving First Beneficial Mortgage Corp., Olympia Mortgage Corp., and United Homes LLC.

According to the proposal, failure to comply with the requirements of the regulation may subject Fannie and Freddie or the companies' board members or employees to supervisory actions by OFHEO, including the issuance of cease-and-desist proceedings and civil money penalties.

The public comment period on the proposed regulation is set at 30 days after publication in the Federal Register.

Read more INMAN NEWS

Wednesday, February 23, 2005

Overnight real estate rates jump

30-year up to 5.25%; 10-year Treasury up at 4.29%

Long-term mortgage interest rates increased Tuesday, and the benchmark 10-year Treasury bond yield rose to 4.29 percent.

The 30-year fixed-rate average gained to 5.25 percent, and the 15-year fixed-rate climbed to 4.81 percent. The 1-year adjustable was up at 3.68 percent.

The 30-year Treasury bond yield increased to 4.69 percent.

Rates are current as of 7:15 p.m. Eastern Standard Time.

Mortgage rate figures are according to, which publishes nightly averages based on its survey of 4,000 banks in 50 states. Points on these mortgages range from zero to 3.5.

In other economic news, the Dow Jones Industrial Average was down 174.02 points, or 1.61 percent, finishing at 10,611.2. The Nasdaq was down 28.3 points, or 1.37 percent, closing at 2,030.32.

Stock and bond figures are current as of 7:30 p.m. Eastern Standard Time.

Read more INMAN News

Sunday, February 20, 2005

Housing Market to Post Near-Record Levels in 2005

Home sales will be down from the high-water marks set in 2004 but are expected see the second-best year on record in 2005, according to the NATIONAL ASSOCIATION OF REALTORS®.

Existing-home sales are forecast to decline 2.0 percent to a total of 6.54 million* in 2005 from a record 6.68 million last year. New-home sales are projected at 1.11 million this year, down 6.2 percent from a record 1.18 million in 2004. Housing starts are seen at 1.92 million units this year, a decline of 1.8 percent from 1.95 million 2004, which was the highest level of housing construction since 1978.

David Lereah, NAR's chief economist, says economic conditions this year will be similar to 2004. "Even with a growing economy and improving job market, inflation should stay tame with only modest upward pressure on interest rates," he says. "The relationship between mortgage interest rates, family income and home prices will remain favorable for homebuyers in most of the country."

Lereah forecasts the 30-year fixed-rate mortgage to rise modestly to 6.3 percent by the end of the year, and average 6.0 percent for all of 2005 compared with an average rate of 5.8 percent in 2004.

The national median existing-home price should increase 5.0 percent in 2005, with the annual price expected at $193,300. The median new-home price is forecast to rise 6.0 percent in 2005 to $232,100. By contrast, appreciation rates in 2004 were 8.3 percent for existing homes and 12.3 percent for new homes.


Friday, February 18, 2005

Freddie Mac unveils new home loan options

Mortgages require as little as $500 in borrower cash

Borrowers with limited credit and savings have more options with a new suite of mortgage products from Freddie Mac, including the Home Possible Mortgage and the Home Possible Neighborhood Solution Mortgages.

The new Home Possible Mortgage combines borrower education and early delinquency counseling, zero and 3 percent down payment mortgage products, and flexible credit requirements.

An additional new program, Home Possible Neighborhood Solution Mortgages, offers the same flexibility plus special features designed to boost home-buying options for teachers, law enforcement officers, firefighters and health care workers by as much as 30 percent in some cases.

The loan products are available through Freddie Mac's national network of more than 2,000 lenders and 10,000 mortgage brokers using Loan Prospector, Freddie Mac's automated underwriting service.

Both products are available as 15-, 20- and 30-year fixed-rate mortgages or as 7/1 or 10/1 adjustable-rate mortgages for one-unit properties.

The basic Home Possible mortgage is available either as a 100 percent loan-to-value mortgage that borrowers can use for single-family home purchases and no-cash-out refinancing, or as a 97 percent loan-to-value mortgage for one- to four-unit properties. Both the zero and 3 percent down payment versions of Home Possible allow borrowers to put down as little as $500 from their personal funds towards the down payment and closing costs for a one-unit property. Two-unit properties require borrowers to put in 3 percent of the property's value; 3-4-unit properties and manufactured homes require a 5 percent borrower contribution.

Read more INMAN NEWS

Thursday, February 17, 2005

Will this housing boom go bust?

FDIC investigates causes of house-price booms

The rapid rise in U.S. home prices, increasing almost 50 percent overall over the last five years, has created a hot-button debate over whether Americans are staring at a possible home-price collapse.

The growth in home prices over the past year surpasses any increase in the last 25 years, according to data released by the Office of Federal Housing Enterprise Oversight, which tracks average quarterly house-price changes. Some economists have raised an eye to this unprecedented run-up in prices, saying it may be cause for concern.

In evaluating what the recent housing boom could mean for the nation's homeowners, the FDIC in a report titled, "U.S. Home Prices: Does Bust Always Follow Boom?" attempts to define housing booms and busts and considers what causes them. The FDIC finds that while home-price booms cannot sustain forever, not all booms end in busts.

Sixty-three U.S. metropolitan areas experienced at least one housing boom since 1978, and 24 cities experienced more than one boom, according to the report. The FDIC defines a "boom" as a 30 percent or more increase in inflation-adjusted home prices during any three-year period.

"Geographically, home-price booms have been concentrated in cities in California and the Northeast, which account for almost 70 percent of our 63 boom markets," the report states.

The FDIC defines a "bust" as an inflation-adjusted price decline of 15 percent or more in five years. Using these criteria, some 21 cities were found to have experienced a housing bust at some point over the last 25 years.


Sunday, February 13, 2005

Automated real estate title search ramps up

Technology streamlines antiquated process

Automated title search companies are dragging one of the last bastions of time-consuming manual data retrieval – the title search process – into the 21st century.

"If the property falls into the location and timeline covered under this system, we can get that title done within 12 hours, as opposed to what would take three or four days to do manually in many states," said Monte Jiran, director of operations for Equity Settlement Services, a client of automated title search services provider Realty Data.

"This is the way things are going. The only question is at what speed," Jiran said.

"In areas Realty Data doesn't cover, we have to send an examiner to the county clerk's office to do research on a property and compile the information. Then we have to re-type it into another report," said Jiran, describing the traditional process.

"With Realty Data, you touch a few keys, it's in readable format and we're much more responsive to our clients. Not to mention, it's less costly," the director of operations said.

"Automating of the title search is really catching on. It speeds up the whole closing process and reduces some of the costs," said Veida Dehmlow, partnership management officer of the Independent Community Bankers of America Mortgage.


Friday, February 11, 2005

Realtors, mortgage brokers benefit most from federal housing programs, study argues

As it turns out, the American dream of owning a home is not the best option for everyone, according to a study released by the Center for Economic and Policy Research. Some low-income families may even be worse off from a home purchase, losing a substantial amount of money in the process.

Even with subsidies from government programs like the American Dream Act, many low-income families would be better off renting, writes Dean Baker, co-director of the Center and author of the report, "Who's Dreaming? Homeownership Among Low Income Families."

"Government programs that push low-income families into home ownership are likely to benefit Realtors, mortgage brokers and other intermediaries, rather than the families who are the targets of this aid," Baker writes.

It is important to recognize prospective home buyers' individual situations, as well as the state of the housing market when deciding whether home ownership would be more beneficial than renting, Baker cautions. Factors like tax benefits that make owning attractive to middle-income families may not apply to low-income families who have no income tax liability.

"Almost by definition, low-income families will owe no income tax because they are below the thresholds where they first become liable for income tax," the study notes. Most low-income families won't receive a benefit from the mortgage interest payment tax deduction.

Low-income is defined as below 80 percent of the median income nationwide, which equals an income of less than $43,000 nationally.

Another factor working against low-income families is the length of time a typical family will occupy their home. For families in this income bracket, recent research shows that the median low-income home buyer stayed in the home for less than four years. That means the transaction costs incurred from buying the home will be "quite important relative to the cost of living in the home."


Wednesday, February 09, 2005

Federal guidelines target scofflaw real estate lenders

OCC addresses practice of influencing appraisers

The U.S. regulatory agency for national banks is cracking down on unlawful and unfair lending practices. Earlier this month, the Office of the Comptroller of the Currency, which charters, regulates and supervises national banks, issued "OCC Guidelines Establishing Standards for National Banks' Residential Mortgage Lending Practices."

The guidelines, which the OCC introduced "as a further step to protect against national bank involvement in predatory, abusive, unfair or deceptive residential mortgage practices," will become effective in April.

These guidelines will become part of the OCC's regulations. "These standards further the OCC's goal of ensuring that national banks and their operating subsidiaries are not involved directly or indirectly through loans that they purchase or make through intermediaries, in predatory or abusive residential mortgage lending practices."

A part of the guidelines offers strong language relating to bank and bank subsidiary conduct with appraisers. "Engaging in a practice of influencing the independent judgment of an appraiser with respect to a valuation of real estate that is to be security for a residential mortgage loan would violate applicable standards," the guidelines state.

If banks violate these OCC guidelines, the OCC can issue a notice requiring a "compliance plan" that details "the steps the bank will take to correct the deficiencies and the time within which those steps will be taken." Banks must submit this plan within 30 days of the Notice of Deficiency sent by the OCC, according to an enforcement process relating to the guidelines.


Tuesday, February 08, 2005

'Appraisal inflation' a major real estate problem

Glenn Roberts Jr. reports that appraisers across the nation say commission greed among their clients is feeding the corruption.

About 55 percent of the appraisers who participated in a national survey reported that they felt pressured to inflate home values in appraisals, according to October Research Corp., which provides information and analyses for the real estate settlement services industry. A group of 500 fee appraisers, who each have at least five years of experience in the field, participated in the survey, which was released last year.

Some appraisers willingly bend numbers on home valuations to satisfy their clients and get more work, a practice known as "appraisal inflation." In its most destructive form, appraisal inflation can assist predatory lending practices and can play a role in flipping schemes, in which properties are fraudulently assessed to win a high loan amount and then resold for even higher prices. Exaggerated appraisals can lead to inflated home prices, increasing the risk of loan default and foreclosure and placing homes out of reach for some prospective buyers.


Monday, February 07, 2005

MBA Releases Long-Term Economic Forecast

The Mortgage Bankers Association (MBA) released its long-term economic forecast for 2005, 2006 and 2007 during its annual State of the Real Estate Finance Industry press briefing. MBA is projecting strong economic growth through 2007, with gross domestic product (GDP) growing at a trend rate of about 3.5 percent in real terms annually.

Existing-home sales will come off record levels and fall by 7.2 percent in 2005, another 7 percent in 2006 and a bit more than 1 percent in 2007. At that pace, sales in 2007 will be at the then record level of 2002.

New-home sales will fall by 6.1 percent in 2005, by 10 percent in 2006 and another 3 percent in 2007, again at the record level of 2002.

In addition, home-price growth is expected to be less rapid, with existing-home prices increasing 4.7 percent during 2005 and new-home prices increasing 3.7 percent. Price increases in 2006 and 2007 are expected to be in the 3 percent to 4 percent range.

Saturday, February 05, 2005

Real estate rates post 5-week decline

30-year fixed falls to an average 5.63% in Freddie Mac survey

Long-term mortgage rates fell for the fifth consecutive week, according to Freddie Mac's weekly mortgage survey.

Freddie Mac reported that the 30-year fixed-rate mortgage averaged 5.63 percent, for the week ended today, down from last week when it averaged 5.66 percent. The average for the 15-year fixed-rate mortgage this week is 5.14 percent, unchanged from last week. Points on both the 30- and 15-year averaged 0.7.

Five-Year Treasury-indexed hybrid adjustable-rate mortgages averaged 5 percent this week, with an average 0.6 points, down slightly from 5.02 last week. There is no annual historical information for last year since Freddie Mac began tracking this mortgage rate at the start of this year.

One-year Treasury-indexed adjustable-rate mortgages averaged 4.23 percent this week, with an average 0.7 point, up from last week when they averaged 4.18 percent.

"Not surprisingly, the one-year ARM rose on the expectation that the Fed would raise rates once again when they met last week," said Frank Nothaft, Freddie Mac vice president and chief economist. "We will probably see the ARM rise a little more over the next few weeks in anticipation of further rate increases by the Fed, while the long-term fixed rates remain fairly flat.

"Mortgages rates remain historically low, which helps to maintain a robust housing industry. Looking forward, we continue to expect rates will not rise very much this year, and that the economy will grow at a sustainable pace, and this should translates into a continued good atmosphere for housing.


Thursday, February 03, 2005

Weekly Mortgage Applications Survey

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending January 28. The Market Composite Index - a measure of mortgage loan application volume - was 706.4, an increase of 7.3 percent on a seasonally adjusted basis from 658.1 one week earlier. On an unadjusted basis, the Index increased 23.7 percent compared with last week but was down 18.8 percent compared with the same week one year earlier.

The MBA seasonally adjusted Purchase Index increased by 0.3 percent to 440.3 from 439.0 the previous week. The seasonally adjusted Refinance Index increased by 16.6 percent to 2253.9 from 1932.8 one week earlier…

Rates were up slightly also.

The average contract interest rate for 30-year fixed-rate mortgages increased to 5.61 percent from 5.58 percent one week earlier, with points increasing to 1.27 from 1.22 the previous week (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

The average contract interest rate for 15-year fixed-rate mortgages increased to 5.10 percent from 5.03 percent one week earlier, with points increasing to 1.27 from 1.22 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for one-year ARMs decreased to 4.08 percent from 4.21 percent one week earlier, with points increasing to 1.10 from 1.07 (including the origination fee) for 80 percent LTV loans.