Daily Briefing: Friday, April 12, 2013
TODAY'S TOP STORIES
Fla.’s $1B homeowner aid program faces fed audit
TALLAHASSEE, Fla. – April 12, 2013 – Florida’s key foreclosure prevention program is facing a federal investigation after Sen. Bill Nelson (D-Fla.) raised concerns about who is receiving the money and how little of the $1 billion award has reached homeowners.
The special inspector general for the Troubled Asset Relief Program confirmed in a letter Thursday that she shares Nelson’s “desire to bring more transparency to the program” and will initiate an audit.
Dubbed the Hardest Hit Program, the plan has been notoriously slow in giving out awards to needy homeowners and has been criticized in past federal reviews for having so few homeowners receiving money.
The most recent numbers as of March 1 show $230 million, or 23 percent of the total allocation, had been spent or encumbered.
“I would ask that your office look thoroughly into Florida’s management of the homeowner-help program as part of the current broader audit of the entire multi-state program,” Nelson wrote.
The Florida Housing Finance Corporation administers the Hardest Hit program. As of March 1, it said 9,052 homeowners have been approved for money, out of 44,854 that have applied. There are 11,953 applications currently in the review process.
The program was announced in February 2010, but Florida was one of the last states to implement its plan, opening it statewide in April 2011.
A year ago, the inspector general criticized Florida for “significant delays” in implementing the program. The inspector general still had concerns six months later, which were outlined in an October report.
“One thing we were trying to say in April is this program is just not getting out to people and the money was just sitting there and the money is still sitting there,” said Special Inspector General Christy Romero following an October report that expressed similar concerns about delays.
Homeowners eligible for Florida’s plan can receive up to a year of mortgage assistance with a cap of $24,000, and up to $18,000 to bring a mortgage current on payments.
© 2013 The Palm Beach Post (West Palm Beach, Fla.) Distributed by MCT Information Services
Time for low interest rates to rise? Some say yes
NEW YORK – April 12, 2013 – Tried taking out a mortgage lately or refinancing one? Chances are that it took a ton of paperwork. And if your credit score was not perfect, it might not have happened at all.
As of last fall, the average successful applicant for a Fannie Mae-backed mortgage (the typical circumstance) had a FICO credit score nothing short of stellar at 769. That’s on a scale of 300 to 850, with nearly 80 percent of the public having a score below 750, according to Fair Isaac Corp., the rating’s developer.
What’s more, the average applicant denied a mortgage had a quite respectable score of 734. Not long ago, that was the type of score expected from the average person approved for a mortgage.
Add in the millions of people who don’t even apply for mortgages because they know they will be rejected, and the picture comes into focus. Interest rates are at rock bottom, but only available to a select group.
This poses a question: What good are all the government’s efforts to revive the housing market if they help only an elite few? Or, to put a finer point on it: Are Washington’s efforts to boost housing doing more harm than good?
A strong case can be made that the answer is yes. It is taken for granted that low interest rates – engineered by the Federal Reserve’s program of flooding money into credit markets – boost the housing market. But they also have perverse side effects and unintended consequences.
The biggest of these, as it relates to housing, is that artificially low rates make banks reluctant to lend. They don’t want to because they know they can get burned when rates inevitably rise to more natural levels.
Right now, banks can make a handsome profit from a portfolio of mortgages in the range of 3.5 percent to 4 percent. That’s because they can borrow at next to nothing and because inflation is negligible. But suppose rates rise to 5 percent to 6 percent, as most people expect will happen in the not too distant future. The banks would then have to write down the value of their portfolios of existing loans. That would have an adverse effect on their balance sheets, and could force them to raise more capital to maintain appropriate cushions and buffers mandated by law.
To deal with this prospect, banks are doing two things: They are being cautious about how much they lend. And they are lending only to people with great credit, offsetting the risk of loss through rising rates by decreasing their risk of defaults.
Add to this a host of new lending regulations and a desire among prosecutors to show their toughness toward banks to atone for their laxness in prior years, and banks have even more reason to lie low.
The solution is not to trot out some new housing plan every few months, as the Obama administration is wont to do. These sound appealing, but they run into the fundamental reluctance of lenders to lend. Nor is it to return to the lax standards that led to the housing bubble.
Rather, the solution is to let market forces repair lending markets. When the Fed unwinds its easy money policies, interest rates will rise. This will be a drag on the economy. But it’s increasingly clear that easing is necessary to promote robust lending. The sooner the Fed feels safe making that move, the quicker the mortgage hassles will fade away.
What good are government efforts to revive the housing market if they help only a few?
Copyright USA TODAY 2013, Nam Y. Huh, AP
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Rate on 30-year mortgage falls to 3.43%
WASHINGTON – April 12, 2013 – Average U.S. rates on fixed mortgages fell sharply this week and moved closer to historic lows, keeping home-buying and refinancing attractive.Mortgage buyer Freddie Mac said Thursday that the average rate for the 30-year fixed loan fell to 3.43 percent from 3.54 percent last week. That’s near the 3.31 percent reached in November, which was the lowest on records dating to 1971.The average rate on the 15-year fixed mortgage dipped to 2.65 percent from 2.74 percent last week. That’s slightly above the record low of 2.63 percent, also reached in November.Low mortgage rates are helping sustain a housing recovery that began last year. Home sales and residential construction are up, prices are rising and more Americans are refinancing. That’s helped the broader economy.Mortgage rates have been low because they tend to track the yield on the 10-year Treasury note. The yield has fallen in recent weeks and went as low as 1.71 percent April 5, after a weak report on March hiring drove investors to seek the safety of a U.S. Treasury bonds. When demand rises, the yield falls.On Thursday, the yield was up to 1.79 percent, still low by historical standards.To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.The average fee for 30-year mortgages was unchanged at 0.8 point. The fee for 15-year loans also was steady, at 0.7 point.The average rate on a one-year adjustable-rate mortgage edged down to 2.62 percent from 2.63 percent last week. The fee for one-year adjustable-rate loans slipped to 0.3 point from 0.4.The average rate on a five-year adjustable-rate mortgage fell to 2.62 percent from 2.65 percent. The fee held at 0.5 point. Copyright 2013 The Associated Press, Marcy Gordon. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Buyers of foreclosures need to act fast
CHICAGO – April 12, 2013 – Foreclosures are being listed at far less than what they likely eventually will sell for – a marketing strategy that generates high interest and multiple bids, some say. As such, buyers of foreclosures need to be prepared to move quickly and come up with a lot more money.
For example, Liz Sidorowicz, a real estate professional with RE/MAX Signature, says she helped her client submit an offer for a foreclosure in Mount Prospect, Ill., for $421,000. The home was listed for $350,000, but her client still lost out to a higher bid.
“I managed to win one out of five last week, but we overbid significantly,” Sidorowicz told The Chicago Tribune. “We got the unit and then it didn’t appraise. So we have to come up with more money down to make the deal fly.”
Some homebuyers who bid on foreclosures have to learn the hard way just how competitive snagging a foreclosure bargain can be.
“The consumer gets burned on a house they really like once or twice,” says Michael Goodwin, an agent at Exit Real Estate Partners in Chicago. “After that happens, they get war-hardened. The next time they are ready to pounce. Not very often does it wind up being the first house. It takes them getting slapped in the face.”
Source: “Buying foreclosures requires patience, and a little more money,” The Chicago Tribune (April 5, 2013)
© Copyright 2013 INFORMATION, INC. Bethesda, MD (301) 215-4688
HGTV giving away home, car and $100K cash
JACKSONVILLE BEACH, Fla. – April 12, 2013 – The first HGTV Smart Home is move-in ready and will be given away to a grand prize winner. In addition to the home, the prize, valued at $900,000, includes a 2013 GMC Terrain Denali and $100,000 from Quicken Loans.
The giveaway period runs through May 31, 2013, 5 p.m. Viewers can enter twice online per day: once at HGTV.com and once at HGTVRemodels.com.
HGTV says the home design is inspired by shingle-style vacation homes constructed in the Atlantic, Neptune and Jacksonville Beach communities during the early 1900s. Located in the beach community of Paradise Key South Beach in Jacksonville Beach, Fla., the home has the latest developments in home technology and green living.
Complete information about the home – including videos, photos and official rules – can be found on
AROUND FLORIDA
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