RTC Mortgage Blog

More Gov't Help on the Way?

September 23rd, 2010 12:32 PM by Richard T. Cirelli

Legislation to Encourage Short Sales Introduced in Congress

The biggest problem with short sales is that the lender that has the mortgage on the house takes too long to make a decision. In the meantime, the buyer finds another house and withdraws the offer or loses interest while he waits, and waits.


Now, a pair of Congressmen has introduced legislation that would require lenders and servicers to speed up the process of approving or disapproving a short sale.  U.S. Representatives Robert Andrews (D-N.J.) and Tom Rooney (R-Fla.) submitted H.R. 6133, the Prompt Decision for Qualification of Short Sale Act of 2010.


The legislation is designed to assist homeowners who are underwater on their mortgages, i.e. owe more on the loan than the current value of the house, and have a buyer reader to purchase the house at a price which will net less than the current payoff of that mortgage.  The legislation addresses only the timing of the decision, not the lenders criteria for approving or disapproving the request.


The bill essentially says that a loan servicer has 45 days to make a decision on the short-sale offer and if they don’t the offer is deemed “accepted".


The bill has been referred to the House Financial Services Committee for consideration. I’ll let you know if this bill goes anywhere but I think something is needed to get these Servicers to make a decision.


Fannie Mae Doing More to Unload REO’s

It seems Fannie Mae is finally doing more to unload its massive quantities of REO (Real Estate Owned) inventory. At the end of Q2 they held 129,310 single-family homes  which is more than twice what it was carrying at the end of Q2 2009.

I recently read that every time home prices drop just 1 percent, the value of all Fannie Mae and Freddie Mac REOs falls by $287 million No surprise, then that Fannie would want to get rid of its REO as fast as possible, especially as we saw bank repossessions hit a new record in August and home prices are again weakening.

Buyer and Realtor Incentives Offered…..

How will Fannie do it? It's renewing an expired program that gives buyers of its REOs "3.5 percent of the final sales price that can be used toward closing cost assistance, including a home warranty."

And they will give real estate agents representing owner-occupants a $1500 bonus. The offer runs from Sept. 23, and must close by December 31, 2010, so this is a pretty short deal.

In the first half of 2010 Fannie sold around 87,000 REOs. If it sells half that, because it's three months not six, then Fannie will be paying out a little over 65 million dollars just to real estate agents, not to mention the assistance back to the buyers in the 3.5% back.

Do you think Fannie is really worried about rising REO inventory?

Update on Conforming Loan Limits to $729,750


The higher loan limits of $729,750 that were instituted 2 years ago and backed by Fannie Mae, Freddie Mac and the FHA are set to expire at the end of the year, but Representative Brad Sherman (D) has introduced a bill to make the larger limits permanent.  He says “The housing recovery is on shaky ground and there are fears that home prices could drop further if the higher loan limits are not extended, as it would be even more difficult to finance homes in high-cost areas”.


I agree and welcome your comments on these articles.


Mortgage Rates This Week…….


The Fed held one of their regularly scheduled Federal Open Market Committee (FOMC) meetings this week and as expected, left the Federal Funds rate unchanged. But, the Fed also re-opened the door to future Quantitative Easing, i.e., more help, if the economic recovery shows signs of further weakening. And, since it is showing signs of further weakening, mortgage bonds reacted favorably. And so, after a couple of weeks of rising rates, mortgage rtes came back down a bit this week.


Of particular interest are the 10- and 15-year fixed rate loans below 4%, particularly for those refinancing. Also, jumbo loans to $729,750 and up to $1.5M.


Call me for quotes to fit your particular needs.

Posted in:General
Posted by Richard T. Cirelli on September 23rd, 2010 12:32 PM



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