Thursday, October 13th, 2011On October 6, 2011, the Senate Finance Committee held another in a series of hearings on tax reform, this time focusing on housing incentives. Five witnesses testified from a variety of perspectives, but they were unanimous on one point: Now is not the time to make any changes to the mortgage interest deduction (MID). [...]
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 The subject of investor overlays has been coming up a lot lately. A different angle may clear up some misunderstandings. REALTORS® and buyers often bring up agency guidelines as if they somehow dictate lending policy. Most people look at this backwards. They think that the agencies like FHA, VA, Fannie Mae, and Freddie Mac set underwriting guidelines and then lenders layer additional rules on top of this. In reality it’s the opposite. Understanding the reality of this dynamic will go a long way toward understanding “investor overlays”. None of the agencies listed above dictate lending policy to mortgage lenders. Mortgage lenders develop whatever policies they feel offer the greatest return, while best managing the risk of the loans they make. If a lender wants to do a 100% LTV mortgage for a homebuyer who is being foreclosed on right now and just completed their bankruptcy, they are allowed to do that even if that buyer doesn’t have a job and has federal tax liens. On the other end of the spectrum.If a lender decided that they are only going to do loans with a maximum loan to value of 50% to borrowers with 800 credit scores, they could also choose to do this. Lenders are free to set whatever standards and policies they choose to set, provided that they do not violate any other laws pertaining to things like discrimination. So let’s look at the actual roles of the agencies. While lenders set their own policies regarding the level of risk in relation to the return they are looking for, they must ensure that they are meeting FHA’s minimum standards if they intend to have the loan insured by FHA. In other words, FHA does not set the underwriting guidelines, but only the minimum standards under which they’re willing to insure those loans. Lenders are free to choose to set a standard that exceeds the FHA minimum. Sales decreased 5.6% from 1,711 units sold in August to the current 1,615 units sold this month. Year-to-year, closed escrows were up 12.7% from the 1,433 units sold last September. Making up the closed escrows this month were 602 REOs (37.3%), 423 short sales (26.2%) and 590 conventional sales (36.5%). These numbers have stayed relatively level month to month with REOs down only .5%, short sales up 9.1% and conventional sales down 5.2%. The median home sales price barely changed month-to-month, decreasing .4% to $164,283 from the $165,000 median sales price of last month. Compared with September 2010 ($180,000), the median sales price is down 8.7%. The $200,000 – $249,999 price range mode still accounts for a majority (13.6% or 219 units) of the 1,615 total sales this month, while homes under $100,000 totaled 289 (17.8%) units. Closed escrows from conventional financing (570 units or 32.3% of all sales) decreased 6.1%, while cash buyers increased (548 units or 31.1%) and FHA financing decreased (505 or 28.7%) 7.2% and 1.7%, respectively. These numbers include the 146 condo sales this month. The average amount of days spent on the market (from list date to opening escrow) 67 days; the median DOM was 37. The Total Listing Inventory has been split up to more accurately display the current market. Active Listings numbered 3,607 properties and Active Short Sales Contingent showed 2,268. Active Short Sale Contingent properties are short sale properties on which initial offers have been made and are not entirely “active.” After breaking down Total Listing Inventory, we find that the Housing Market Supply figure is more accurately reflected. The Housing Market Supply figure for August was 2.2 Months – down 4.3% from last month. This figure represents the amount of time – in months – it would take to deplete the Active Listing Inventory (3,607) given the current number of closed escrows (1,615). Continue reading: Sales Prices Flat, Decreased Activity for September |
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