Utah Real Estate & Mortgage Blog

The Obama administration yesterday released its long-awaited plan to stem foreclosures. It’s organized into three categories:

1.) Help for home owners making their payments but at risk of default and foreclosure.

Home owners with a Fannie Mae or Freddie Mac loan would be eligible to refinance as long as their mortgage doesn’t exceed 105 percent of the home’s current market value. Currently owners need to have at least 20 percent equity. Potential impact: 4-5 million households.

2.) Help for home owners already in default and in need of loan modification.

For lenders that voluntarily agree to lower a borrower’s payment so that it makes up no more than 38 percent of the borrower’s income, the government would share the cost of lowering the mortgage burden to 31 percent of income. Incentives to lenders to participate include a $1,000 payment.

Borrowers can receive up to $1,000 as an incentive to stay current on their new mortgage. Still in the works is a proposed provision that would allow bankruptcy judges to require loan modification (known as a cramdown) as part of a household’s restructuring. That provision requires legislation by Congress. Estimated potential impact: 3-4 million households.

3.) Doubled resources to Fannie Mae and Freddie Mac.

To encourage investors to buy the secondary market companies’ mortgage-backed securities, the government explicitly backstops them to up to $400 billion, twice the current amount.

The plan does not provide help to investors or to home owners who are in trouble with a second home, nor does it apply to homeowners whose mortgage is part of a private-label mortgage security that is not backed by Fannie Mae or Freddie Mac.

“The administration’s proposed plan, combined with provisions like the $8,000 first-time home buyer tax credit in the just-enacted American Recovery and Reinvestment Act, will help minimize foreclosures, shrink housing inventory, stabilize home values, and move the country closer to an economic recovery,” says NAR President Charles McMillan.

Source: REALTOR® Magazine Online

The Senate today passed the bill to help stimulate the economy. I have my own opinions on the bill as I’m sure you do, but nonetheless I’m here to pull out how this will impact real estate in Utah. The bill is heading to President Obama on Monday and there is no doubt he is going to sign it. So how does this bill affect real estate in Utah?

1) The existing $7,500 tax credit will be raised to $8,000 with NO payback (a true credit). Under the new Economic Recovery Plan, if you’re a first time home buyer and purchase a house on or after Jan 1st, 2009 and before Dec 1st, 2009, you can get a tax credit of up to eight thousand dollars. How much you get, depends on the cost of the home (10 percent of a home’s sales price, or $8,000, whichever is less).

2) Interest rates have come down 125-150 basis points which may spur lower rates to buyers and people looking to refinance. We are noticing although rates should be lower based on our indicators, lenders are so inundated with loans that they are unwilling to lower rates to spur business they can’t handle.

3) $50 billion for foreclosure mitigation, with Geitners Treasury plan signaling that the second half of TARP and TALF will be used to mitigate foreclosures through a government guarantee, drive down interest rates by buying another $200-300 billion of mortgage paper from the GSES’s thereby freeing them up to do the same with new mortgages, and Fannie has just agreed to lift the cap of 4 investment properties eligible for loans and raise it to 10.

In addition, we preserved what we have – mortgage interest deductability, real estate tax deductability, and the $250,000/$500,000 cap gains exclusion.

You may have heard about the $15,000 credit, but that was negotiated down to the $8,000 credit. We would have loved to have gotten that or the Homebuilders $22,000 credit idea as well as their 5 year loss carryback deal, but they were considered too rich for this program and didn’t make the final cut.

I wanted to give you all a heads up on this.  Initially the transition was supposed to take place on February 17th.  Congress actually recently extended that deadline to June 12th.  This was to allow consumers more time to make the transition, but they did not require broadcast stations to extend their crossover dates.  This does not necessarily give us all more time, but it might.  Some stations are sticking to the date of February 17th while others are giving their viewers more time to get a digital converter box.

If you are still watching TV from rabbit ears, or an over-the-air antenna, you MUST upgrade to cable or satellite or get yourself a digital converter box.  Each household is eligible to receive two $40 coupons to be used to purchase an analog to digital converter box.  If you are in need of one and haven’t gotten a converter box yet, you can get your coupons here at https://www.dtv2009.gov/.

There’s no hiding the fact that the economy is bad, very bad.  Most economists are claiming this to be the worst recession since the Depression. We encounter it everywhere we go, anywhere we look, and whomever we speak with.  The topic of choice for many people these days is the economy.  I wanted to twist things slightly, and try showing the good news, since the media, and most people are incapable or unwilling to look on the bright side.  I think it’s something we all want, good news.

1. Let’s start with the unemployment rate in Utah. While it has gone up, it is still one of the lowest of any other state in the nation.  That’s good news right?  In December, CNN Money listed Utah as having the 4th lowest unemployment rate in the nation at 3.7%.  North and South Dakota were lower and Wyoming reported the lowest rate at 3.2%.  Rhode Island and Michigan rounded out the top at 9.3% and 9.6% respectively. Utah has historically been a place that often shows a better economy that most other states, regardless of the state of the nation or world.

2. On to Mortgage Rates. Mortgage rates are at historical lows.  If you are a potential home buyer or thinking of refinancing, you are already paying attention to these rates.

A couple of months ago I helped a buyer purchase a home in West Jordan.  They were initially very concerned about the price of the home.  They were approved to purchase a home up to $300,000, but wanted to stay in the $225,000 range, where they felt more comfortable with the mortgage payment.  We had been looking for many weeks, and they were having a hard time finding anything that interested them.  During that time, the interest rates had fallen from their initial quote from the loan officer.  I brought it to their attention that because the rate had dropped so much that we should start looking in the $250,000 range.  The difference in the mortgage payment between the lower rate, and the higher priced home and the lower price range with a higher interest rate was almost nothing.  We actually found a home for them the first time we went out in that higher price range.  They were ecstatic.  When I first brought it up to them about the possibility of looking in the higher price, they brought up the fact that they didn’t want to because of a higher mortgage payment.  After showing how they could be right in the same range with a lower rate EVEN if they purchased a higher priced home, they immediately jumped at the opportunity to purchase a larger, newer home.

While the rates are fluctuating almost as often the stock market, they are low.  It’s getting more and more difficult for mortgage professionals to lock in rates at the bottom because they change multiple times a day.  It didn’t used to be that way.  If you want to ensure you get the rate you request, please contact us today to be enrolled in our “Mortgages Under Management” program.  What this does is keep track of the rate that you are wanting, and when the rate falls to that point, we will lock it in for you.  It’s a very cool program we rolled out a few months ago.  We have had a ton of response on it and it’s already paid off big, for some people.

3. Home Prices are down, way down. Home prices have fallen more than 40% in many areas over about the last year.  If you are thinking of purchasing a home, now is the time.  There hasn’t been a better time to buy in many, many years.  Given the amount of foreclosed properties that are on the market, you will surely find a great deal.  I specialize in working with lenders on their foreclosed properties, so if you are interested or have questions, please don’t hesitate to shoot me an email or call.

I’m not one to worry about everything I hear, yet I don’t discount anything I hear either, as some of it usually has truth to it.  There is no denying the fact that the economy has been better before.  All that really means in a down economy is that there is no better time to make your purchases (on anything – cars, homes, entertainment, etc.) as you are very likely to get a great deal on everything.  There is no better way to get out of a recession than for all of us to start spending some of the money we make.  I know it’s hard to do, but trying to save and choosing not to spend any money right now is only going to put our economy in further recession.