Austin Real Estate Blog

Over the last three years there has been sharp downswing in housing prices. In many markets the prices dropped out quickly, not stabilizing until only recently. As foreclosures rose, many didn’t believe they housing market was going to stabilize any time soon. This thankfully, has not proven to be the case. Recent reports and studies have revealed that in 2009, specifically since the second half has begun the housing market in stabilizing and reestablishing solid markets where a loss was drastic previously. Home sales are up creating the most stable market since the mortgage crisis began.

The 8 thousand dollar tax credit is being given some credit for easing the decline and initiating the incline in single family home purchases. This tax credit will expire on November 31st, 2009, this crucial deadline combined with lower interest rates have become the saviors of the housing market.

In May of 2009 the OFHEO or Office of Federal Housing Enterprise and Oversight announced the first of a steady increase in home prices, over previous months. It edged up that first month with .09% and has continued every month since. In one area of significant concern with the mortgage crisis, the pacific coast has registered one month with an increase of 2.7% showing significant improvement.

As the market continues to stabilize, buyers come out of the woodwork, and housing prices are starting to inch back up to more anticipated levels. This proves real estate and the economy as a whole has entered a state of recovery.

This message is to alert you to changes in the federal Truth-in-Lending Act regulations, which will have an impact to every mortgage provider.  It will require a fundamental change to how we finalize loan terms for the borrower prior to closing. Changes at the closing table could require the borrower to reschedule the closing date if a revised Truth-In-Lending (TIL) is needed.

The rules for the Mortgage Disclosure Improvement Act were finalized Friday, May 8^th, and it is applicable to all mortgage lenders (federally chartered or state licensed).  For applications taken as of July 30, 2009, new requirements about the delivery and the accuracy of disclosures will apply.  One of the new requirements is that the borrower must be provided with an accurate APR disclosure at least three business days prior to closing.

Remember the new rule with “3/7/3”

3 days after application – An initial Truth-In-Lending (TIL) statement must be provided no later than 3 business days after receipt of the loan application.  Our current process generates an auto-compliance package that complies with this requirement, so no changes are needed.

7 business days after initial application – Waiting period – the borrower is not permitted to close until at least seven business days have passed since the TIL was placed in the mail or provided to the borrower.

3 business days prior to closing – Waiting period – the borrower must receive an accurate APR on their TIL at least 3 business days prior to closing. If it was provided before that period of time, because the loan terms were locked in earlier in the process, no new TIL is required if there is no change to the APR or the change is less than 1/8th of a percent.

If the final loan terms cause the TIL / APR to be understated by more than 1/8th of a percent, a revised TIL with an accurate APR must be provided to the borrower so that they receive it at least three business days prior to closing. It must be in their hands at that time, and they may close on the 3rd business day after that day.

What this means to you? All Realtors and buyers need to be advised of these new timing requirements, which will limit rush closings and could even delay closings.

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From Green Building Talk

Getting Into Hot Water: Solar Water Heating Pays For Itself Five Times Over
An analysis of the engineering and economics for a solar water-heating system shows it to have a payback period of just two years, according to researchers in India. They report, in the International Journal of Global Energy Issues, on the success of the 1000-liter system operating at a university hostel.

The current focus in the developed world is on advanced technological approaches to alternative energy sources, such as photovoltaic cells for solar power and harnessing wind and wave with elaborate systems to generate electricity. However, the cost of such systems may be prohibitive for some applications in the developing world. They also often ignore the fact that a mundane process such as heating water might best be carried out using direct heat from the sun rather than including a waste energy-conversion step.

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Read the rest at GreenBuildingTalk.com

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From Associated Construction Publications

Construction Jobs Decrease by 104,000 in February

Construction employment fell by 104,000 in February with losses throughout the sector. This industry has shed 904,000 jobs since the recession began, with about half of the decline occurring in the past 4 months, according to testimony by Keith Hall, commissioner, Bureau of Labor Statistics, before the Joint Congressional Economic Committee today.

Although the stimulus package is expected to positively affect construction employment through “shovel-ready” projects, none of that has started yet.

The decline in construction employment mirrors declines in the rest of the labor market as the sharp and widespread contraction continued in February.

Nonfarm payroll employment fell by 651,000, following declines of 681,000 in December and 655,000 in January. Since the recession began in December 2007, job losses have totaled 4.4 million, well more than half of which occurred in the past 4 months. In February, the unemployment rate climbed from 7.6 to 8.1 percent, the highest rate in over 25 years.

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Read the rest at Associated Construction Publications

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Mortgage rates tumbled yesterday as a result of the Fed announcement that they will be buying mortgage-backed securities!

What does this mean to you?  30-yr fixed rates are now at about 5.25% with 1pt OR 5.5% with no points!!!

Compare this to average rates just from earlier this week – 5.75% with 1pt or 6.125% with no points.  That’s almost a $100/mo payment savings in just two days!

And … if you compare this to Freddie Mac’s estimated average 30-yr rate of 6.3% for next year, that’s about a $230/mo savings.

Marie Funston | Senior Mortgage Advisor | 750-7270

What Did Interest Rates Do This Week?
** according to Freddie Mac **

30-yr Fixed – Down Slightly
This Week:  5.67%
Last Week:  5.68%
1yr Ago:  6.28%

15-yr Fixed – Down Slightly
This Week:  5.15%
Last Week:  5.17%
1yr Ago:  6.02%

5/1 ARM – Lower
This Week:  5.21%
Last Week:  5.32%
1yr Ago:  5.99%

Highlight of This Week’s Major Economic Reports

Congress passed its much-talked-about economic stimulus package, which is aimed at putting more money back in consumers’ hands.  More money in our pockets means more spending, which means more economic activity to thwart a recession.  At least we hope.

On the mortgage side, it allows for Fannie Mae and Freddie Mac to increase their loan limits up to $729,750.  But only for “high cost” areas.  For places like Austin, Texas, the “confirming limit” will stay put at $417,000, which means any loan above this amount will still be considered a jumbo loan and will therefore be subject to different (stricter) underwriting guidelines and higher interest rates.

Will this economic stimulus package actually help the national housing downturn?  We’ll just have to wait and see how the markets react to the changes.

One thing has been clear, though:  lenders are continuing to tighten their underwriting requirements, making it harder to obtain a new mortgage loan.  According to a recent Fed survey of Loan Officers, 53% tightened requirements for “prime” borrowers, 72% for “subprime” borrowers, and 85% for “non-traditional” borrowers (i.e., those seeking such products as interest-only loans).  While the tightening for subprime and non-traditional borrowers comes as no surprise, it’s amazing to see how much even those with good credit scores are being impacted.

What to Look for Next Week

January Retail Sales and an appearance by Fed Chairman Ben Bernanke will highlight the economic show next week, but neither is expected to significantly impact mortgage rates.

Short-Term Rate Outlook

Stable to Slightly Higher

The real estate industry has long been susceptible to price inflation, fraud, and other unsavory practices. Making it illegal to coerce an appraiser would be a good thing, but I hope that most appraisers wouldn’t see that as a way out of talking and reviewing agent recommendations when there is an issue with an appraisal.

I’ve not had any problems with an appraiser doing that, but I’ve heard stories about appraisers not taking input. Lenders seem to be the culprit in most cases of coercion that I’ve heard of.

You can read the summary of the Federal Reserve Proposal below in the first quoted area.

Additionally, in the news recently, is an appraiser that is suing WaMu for breach of contract, unfair business practices, interference with her ability to earn a living, fraud, conspiracy and slander. The bank is accused of pulling business from an appraiser who refused to make the appraisals favorably to the bank. Man, o, man. That’s bad news for the bank. What do you think about inflated appraisal? Send us a comment and let us know.

Federal Reserve Proposal Addresses Appraisal Coercion
Excerpt from Appraisal Institute’s Appraiser News Online Vol. 9, No. 1, January 15, 2008

The Federal Reserve Board recently proposed prohibiting creditors and mortgage brokers from coercing real estate appraisers to misstate a home’s value on all mortgages. The announcement was part of the Fed’s December 18 proposed changes to Regulation Z (Truth in Lending), which would restrict certain practices and require certain mortgage disclosures to be provided earlier in the transaction.

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In addition to prohibiting creditors and mortgage brokers from coercing appraisers, the Board also proposes to prohibit creditors from extending credit when creditors know or have reason to know, at or before loan consummation, that an appraiser has misstated a dwelling’s value. The regulation would apply to all consumer credit transactions secured by a consumer’s principal dwelling.

In its discussion on the topic, the Board said, “Pressuring an appraiser to overstate, or understate, the value of a consumer’s dwelling distorts the lending process and harms consumers… Inflated appraisals of homes concentrated in a neighborhood may affect other appraisals, since appraisers factor the value of comparable properties into their property valuation. For the same reason, understated appraisals may affect appraisals of neighboring properties. Thus, inflated or understated appraisals can harm consumers other than those who are party to the transaction with the inflated appraisal. Moreover, these consumers are not in a position to know of the practice or avoid it.”

The proposed regulation defines the term “appraiser” as a person who engages in the business of providing – or offering to provide – assessments of the value of dwellings.

The commentary to the proposed regulation gives examples of acts that would violate the regulation: implying to an appraiser that retention of the appraiser depends on the amount at which the appraiser values a consumer’s principal dwelling; failing to compensate an appraiser or to retain the appraiser in the future because the appraiser does not value a consumer’s principal dwelling at or above a certain amount; and conditioning an appraiser’s compensation on loan consummation.

The commentary also lists examples of acts that would not violate the regulation: requesting that an appraiser consider additional information for, provide additional information about, or correct factual errors in a valuation; obtaining multiple appraisals of a dwelling (provided that the creditor or mortgage broker selects appraisals based on reliability rather than on the value stated); withholding compensation from an appraiser for breach of contract or substandard performance of services or terminating a relationship for violation of legal or ethical standards; and taking action permitted or required by applicable federal or state statute, regulation, or agency guidance.

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The Nation’s Housing

Appraiser’s Lawsuit Puts Lenders on Notice

By Kenneth R. Harney
Saturday, January 26, 2008; Page F01

Real estate appraisers have complained for years about demands from loan officers that they fudge and inflate numbers to allow mortgage deals to close.

Now a California appraiser has sued the country’s largest thrift institution, Washington Mutual Bank, charging that she was blacklisted for refusing to provide favorable appraised values despite declining market conditions.

The lawsuit, by Jennifer Wertz, comes just two months after the state of New York sued an appraisal management company, First American eAppraiseIT, for allegedly giving in to pressure from Washington Mutual to inflate property values for loan applications — contributing to mortgage-market losses. EAppraiseIT and LSI, a unit of Fidelity National Information Services, were also cited in Wertz’s suit as contractors to Washington Mutual.

Wertz said in her complaint that she began performing appraisals for Washington Mutual in 2001 and earned “in excess of $100,000 a year” from her work for the bank. But last May, according to the suit, a Washington Mutual manager upbraided her for describing local property values in an appraisal as “declining.” The manager “insisted that [Wertz] change her report to indicate ’stable’ conditions so that the loan could be approved.”

All the relevant data suggested otherwise, however, and Wertz refused. The manager then allegedly told Wertz that she would be banned from all further assignments from Washington Mutual if she did not cooperate. Wertz declined to do so — citing federal, state and professional rules requiring her to provide objective and accurate reports free of outside influence. According to the lawsuit, Wertz was then cut off from Washington Mutual business through the appraisal management companies.

Wertz’s lawsuit, filed in California Superior Court in Sacramento, charges breach of contract, unfair business practices, interference with her ability to earn a living, fraud, conspiracy and slander, among other alleged violations.

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