Deb

Housing's Big Picture Isn't Pretty

People have to live somewhere, whether owning or renting. It would be interesting to see a chart comparing the cost/benefit of renting versus owning, over a period similar to Mr. Schiff's article.

Cash Offers for Bank Owned Property Soar

As a REALTOR for 30+ years I am finding in our market that the bank's selling their OREO properties are pretty much nightmares to work through. If federally chartered/national banks, they ignore most state real estate laws.The state admits they don't have the tank power to force them to comply. Fannie Mae-owned are among the worst. They don't accept FHA, which due to the 3.5% cash investment required by the Buyer works best for many first-time homebuyers who don't have the 20% many conventional loan products now require. Fannie Mae, if I understand correctly, says the FHA process now that they are looking at it from a Seller's point of view/wearing Seller's shoes, is to much work for them as a Seller. Cash or conventional rules. One offer made on behalf of a first-time Buyer was $96,000 FHA on a Fannie Mae-owned property (as in why not try when they have no other offers) which would require no worked from the Seller's part was rejected only to be made available at $75,000 suggested price by Auction (!!!) even while we are actively trying to get our offer through. No luck on our part. They wouldn't even look at it when they heard FHA. These are our tax dollars going down the drain. Buyer's use cash (from parents or by inverstors) because that is what works best for OREO. The first-time and other Buyer's who need to use FHA to qualify would love to be able to make it through the hoops and particiate in the opportunities of the OREO. Every OREO transaction I have done so far has been cash for this reason only.

The Fannie/Freddie Heist

On a Fannie-owned foreclosures, Seller terms need to include not only what they are offering now "Cash or Conventional," but the currently omitted mortgage types of FHA (typically needs 3% of Buyer's money or a gift) and VA (veterans benefits include being able to buy "zero-down.").
FHA and VA buyers need acceptable credit scores showing the borrower pays their bills, not just "blood-pressure and a 6-pack of Coca-Cola" (as in "sub-prime" mortgages of fame in the current crisis).
If the home needs repairs, then have in advance of offering "for sale" an FHA/VA approved inspector preview the property and write up a list of repairs and have some escrow arrangement from the repairs being included in the purchase price so the repairs can be made, from the escrow at the Buyer's expense (from approved-in-advance written estimates), once the buyer owns the home. (Funds released only after work completed by whichever contractor, etc. Not hard to manage...we do this on roof replacement for properties sold in the winter, for example).
This will allow more financially qualified Buyers to compete for purchasing the foreclosed Fannie owned properties and help keep the prices from dropping down to a level where the the majority of Buyers are investors (Most owner-occupied home-buyers do not have cash or first-time Buyers typically do not have 20% down). I have seen Fannie owned property without any repairs needed being offered only "Cash or Conventional" and rejecting an offer of FHA that netted them out notably more than their offered terms. They rejected the FHA and continued to offer "For Sale" at about 20% less. Go figure. (And let me throw in that their offer pre-review worksheet is idiotic. Poorly designed work-sheet results in good offers not even being looked at by Fannie, but are rejected by a "gate-keeper"). Knowing they were getting an offer within 24 to 48 hours, Fannie none-the-less (becasue it was on their "schedule" to do so, immediately sent a particular property over to "pre-auction" status, meaning the Buyer would need to pay an additional fee of 5%, called a "Buyer's Premium" on top of the offering price. This 5% fee is in addition to the real estate commission. (As you may have guessed that particaulr transaction didn't materialize and Fannie continued to offer the property "For Sale." Our future tax dollars at work!!!
Fannie doesn't have to make good decisions; the Gov't has told them they are too big to fail.

You Don't Own Real Estate - It Owns You

You have to live somewhere. If you own a home that in all of its costs is not too expensive for your means and you work at paying down the debt over the term of your mortgage (Meaning: No "home equity loans" or "prem-a-debt") eventually your home is paid for. With that formula, your home is an asset-in-the-making while you enjoy living there.

The Two Housing Crises

Sounds like a socialist to me...

Blame Realtors, Brokers and Bankers - Not Greenspan

Lending to borrowers with "blood pressure and a 6-pack of soda" (poor credit, no down payment, etc), and expecting a good result is not very realistic. Poor lending policy creates a "house of cards" and is independent of interest rates, fees or anything else. Misleading ratings for this "weak paper" fueled a secondary market for some mortgages that if accurately rated wouldn't have been salable.