MARKET UPDATE - JUNE 2009

MARKET UPDATE – JUNE 2009

HVCC UPDATE

What is the HVCC? A quick review:

In an attempt to reduce mortgage and appraisal fraud, the new Home Valuation Code of Conduct has received considerable blow back from those in the industry. The HVCC will prevent mortgage brokers and loan officers from ordering appraisals on conventional mortgages directly from the appraiser, in hopes of reducing value manipulation and fraud. The appraisals under the new HVCC would have to be ordered through a third party clearing house or through the lender directly. The HVCC went into effect May 1st, 2009.

“NAMB (National Association of Mortgage Brokers) is taking meetings this week with various officials to discuss potential avenues for removal of the HVCC. NAMB was successful in securing language in H.R. 1728 (passed by the House of Representatives) that called for an in-depth study of the effects of the HVCC. This bill has not yet been signed into law. NAMB has been requested by the Federal Housing Finance Agency (FHFA) to collect personal experiences from mortgage professionals and/or consumers of specific problems directly caused by the HVCC. NAMB is continuing to investigate other avenues by which to fight the HVCC. Please see below for what NAMB has been doing since April 2008 to fight the HVCC. NAMB will send weekly HVCC updates via News from NAMB (members only).”

“NAMB has been requested by the Federal Housing Finance Agency (FHFA) to collect personal experiences from mortgage professionals or consumers of problems directly caused by the HVCC. These problems can consist of increased costs, appraisal quality, portability issues, regulatory issues, etc. You must include specific, tangible evidence of how the HVCC has harmed your consumers and/or prevented you from conducting business.” – NAMB

A look at the first 30 days under the new HVCC rule:

Prior to HVCC: Under HVCC:

Appraisal Fee: $275-$300 $450-$550
Turn Times: 24-72 hours 5-10 days
Values: Market 10%-30% under Market

The HVCC has increased costs to consumers, drastically reduced values making it increasingly difficult for consumers to obtain mortgages, delayed lending turn times, and hurt legitimate appraisers ability to be in business. If you wish to voice a concern regarding the HVCC law, or have had a personal experience under the new HVCC law, please email me your thoughts, complaints and/or concerns. I will be forwarding all letters to our representatives in hopes to revise or eliminate the HVCC before it does any more damage.

Send to: aaron@genevafi.com

PRICES CONTINUE TO FALL BUT SALES ARE UP

“The S&P/Case-Shiller National Home Price index, a bellwether of real-estate market direction, plunged a record 19.1% during the quarter compared with the first three months of 2008. That followed an 18.2% drop last quarter. The Case-Shiller 20-city index dropped 18.7% year-over-year, also a record. It fell 18.5% during the last three months of 2008. This index has plummeted 32.2% from its July 2006 peak and has fallen 32 straight months.” – CNNMoney.com
Since the peak of the housing boom, Phoenix, Arizona has recorded the largest decline of 53%, followed by Las Vegas at just over 50%.

Home sales were up 3.2% nationally in April. Housing inventory nationally is at 10 months, down from over 12 months in January. Again, one month does not make for a rebound, but it may be a sign of light at the end of the tunnel.

So where are the best deals on housing; Phoenix and Las Vegas? Not only are the values down over 50% from there highs, it is commonplace to find properties for sale that are 50% off the cost of construction.

In the greater Phoenix metropolitan market we are now seeing bidding wars over lower cost housing. It is common to see multiple offers on the same home hours after being listed on the MLS, with contracts being accepted tens of thousands of dollars over list price. Investors have returned to the market making it increasing difficult for first time home buyers to find inexpensive homes. For first time homeowners, do not despair. There are thousands of homes on the market that are priced extremely well; it just may take several offers before you have an accepted contract in hand. There are still hundreds of homes listed for well under $100K on the market.

TAX REVENUE DOWN

“U.S. income tax revenues plunged 44 percent in April, compared with a year ago, the American Institute for Economic Research said. The reason is easy to find. About 6 million U.S. jobs were lost in the 12 months prior to April, USA Today reported Wednesday.”
“Dropping revenues are "one of the drivers of the ongoing expansion of the federal budget deficit," said John Lonski, chief economist for Moody's Investors Service. The Congressional Budget Office estimates the 2009 budget gap will reach $1.7 trillion for the fiscal year.” – CNNFN.com


FAILING BANKS

Bank United of Florida became the 36th bank in 2009 to fail on May 21st. Bank United oversaw $13 billion in assets, of which most were sold to private equity groups.

Bank United will not likely be the last bank in 2009 to fail. The Federal Deposit Insurance Corp (FDIC) just released a report that there are over 300 banks on the “endangered” list to date.

To put this in to perspective over “1,900 financial institutions went under during 1987-1991, peaking with the failure of 534 banks in 1989.” – CNNFN.com

INTEREST RATE UPDATE

“Late last week the bond market started worrying about inflation and servicing the federal deficit, and one thing led to another and the 10-year Treasury yield shot from 3.4% last Thursday to above 3.7% during trading yesterday (Thursday) before closing lower at 3.67%. Plenty of market watchers are expecting the trend line on the 10-year Treasury to keep moving up.” – CNNFN.com

Do I refinance and lock in now, or continue to watch rates? If the Federal Reserve continues to purchase Treasuries and Mortgage Backed Securities, interest rates will likely drop once again. If not, interest rates will continue to climb. The days of rates under 5% may be a thing of the past. Anyone have a crystal ball?

Mortgage Type Interest Rate APR

30 Year Fixed 4.750% 5.034%
15 Year Fixed 4.375% 4.862%

Call today for your individual scenario rate quote.

*Interest rates as of 05/29/09. Conforming interest rates. Not applicable for FHA and VA loans. Interest rates and APR based on loan amounts not to exceed $417,000. Loan to values not to exceed 80%. 740+ credit score. Owner occupied only. Purchase and rate in term refinances. Not all applicants will qualify.

For any additional information, call or email me at any time.

Sincerely,

Aaron VanTrojen
President
Geneva Financial, LLC.
Office: 480-368-2000
Email: aaron@genevafi.com

Geneva Financial, LLC is a mortgage banker / broker licensed in: AZ, CA, CO, ID, MN, NM, NV, OR, WA, WI.

MARKET UPDATE – MAY 2009

Foreclosures Hardest Hit Markets – Top 10

1. Las Vegas, Nevada: 1 in 22 homes
2. Merced, California: 1 in 24 homes
3. Fort Myers, Florida: 1 in 26 homes
4. Stockton, California: 1 in 27 homes
5. Ontario, California: 1 in 28 homes
6. Modesto, California: 1 in 29 homes
7. Bakersfield, California: 1 in 37 homes
8. Vallejo, California: 1 in 37 homes
9. Phoenix, Arizona: 1 in 40 homes
10. Port St. Lucie, Florida: 1 in 46 homes

Total foreclosure filings reached 803,489 in the first three months of the year, the highest monthly and quarterly totals since RealtyTrac began reporting in January 2005.

342,000 home owners received a notice of default in April. -Source: CNNMoney.com

Home Values Fall

Home sales in March were down from April, which saw an increase in sales and value.

“The National Association of Realtors said that existing home sales fell last month to a seasonally adjusted annual rate of 4.57 million units, 3% lower than the downwardly revised rate of 4.71 million in February. “

The report said first-time buyers made up 53% of existing home sales in March. And sales of "distressed properties" accounted for just over half of all transactions in the month. Foreclosed homes typically are selling for 20% less than traditional homes, according to NAR.

"The share of lower-priced home sales has trended up, indicating a return of many first-time buyers," said Lawrence Yun, NAR chief economist, in a statement. "Sales in the upper price ranges remain stalled because of higher interest rates on jumbo loans."

The national median existing-home price was $175,200 in March, up 4.2% from $168,200 in February. Still, the median existing-home price was down more than 12% since March 2008, when it was $200,100.

HR 1728 Mortgage Reform and Anti-Predatory Lending Act

HR 1728 passed the House on May 7th. Although the bill has many constructive elements, the bill also has the potential in its entirety to put undue pressure on the mortgage industry and increase borrowing costs to all potential borrowers. Below are some of the most controversial aspects of the bill.

Steering Incentives/Yield Spread Premiums: Yield spread premiums and other compensation that could cause mortgage originators (i.e., mortgage brokers and bank loan officers) to “steer” applicants toward more costly mortgages are banned for all mortgage loans.

Sounds good on the surface, but only to those that do not understand the function of yield spread premiums and the potential benefit to the customer. Yield spread premiums (YSP) is paid to the mortgage banker/broker when an interest rate is increased over the “par” rate. Example: 4.50% is the par rate (which nets $0 to the broker), 4.75% will pay 1% of the loan amount to the broker by the lender. If the customer chooses the higher rate, the mortgage broker can reduce loan fees or offer a no “points” mortgage. This may benefit the borrower by paying lower closing costs if they intend on living in the property a shorter period of time (in most cases < 5 years). By eliminating yield spread premiums, all borrowers will pay higher fees, and points. Consumer options would be limited.

Ability to Repay/Net Tangible Benefits: Every residential mortgage loan will subject to two new Federal standards that apply to creditors, assignees and securitizers. At the time the mortgage is entered into, the creditor must make a reasonable, good faith determination:
1. that the consumer has a reasonable ability to repay the loan at a fully indexed fully amortizing rate, based on verified and documented information including the consumer’s credit history, current and expected income, debt-to-income ratio, and other financial resources; and
2. for refinancings, that the loan will provide a net tangible benefit to the consumer, based on information known or obtained in good faith by the creditor.

David G. Kittle, CMB, Chairman of the Mortgage Bankers Association, while testifying before the House Financial Services Committee at a hearing on H.R. 1728 on April 23rd stated, “The bill’s provisions empowering the federal banking agencies to establish net tangible benefit rules for refinancings should require that these standards comprise bright-line tests such as a specific percentage decrease in loan payment or percentage increase in loan amount. If these standards remain subjective, credit will be far more costly, if it is available at all.”

Credit Risk Retention: Requires the Federal banking agencies jointly to issue regulations that require creditors, with respect to loans other than qualified mortgages to retain an economic interest in a material portion (at least 5 percent) of the credit risk of each such loan that the creditor transfers, sells, or conveys to a third party. A creditor may not directly or indirectly hedge or otherwise transfer the credit risk it retains under these regulations.

“We are just as concerned about the requirement that lenders retain at least five percent of the credit risk presented by non-qualified mortgages.”- David G. Kittle, CMB, Chairman of the Mortgage Bankers Association

According to Kittle, the risk retention provision would make it impossible for many lenders to compete, especially non-depository lenders who do not keep significant cash on hand but rather rely on warehouse lines of credit. This idea would ultimately narrow choices, lessen credit and significantly increase costs to borrowers. – mortgagebankers.org

The definition of “qualified mortgages” is so vague that it could eliminate most if not all mortgage brokers and mortgage bankers that do not have the capital to retain a 5 percent interest in loan originations.

According to Kittle, H.R. 1728 would raise costs on broad categories of safe mortgage products, including loans with adjustable rates, many jumbo loans, fixed 15, 20, 25 and 40-year loans, FHA, VA and Rural Housing loans, as well as some Fannie Mae and Freddie Mac mortgages. – mortgagebankers.org

“Lenders already have skin in the game by virtue of their representations and responsibilities to investors,” Kittle pointed out.

To view the bill in it’s entirety go to: http://www.house.gov/apps/list/press/financialsvcs_dem/1728.pdf

There are already 15 proposed amendments to the bill which still have to go before the Senate; who is working on a similar bill.

Financing Options for Home Buyers / Owners

Upside Down: If you currently have a mortgage that is more than your homes value, you may be able to refinance if you owe less than 105% of the homes value. If you exceed 105%, or have a Jumbo mortgage, you may not have any refinance options available at this time.

1st Time Home Buyer: $8k tax credit is still available. There are also rumors that HUD will allow this to be used as a down payment in the form of a bridge loan in the near future.

Currently have a FHA mortgage: If you currently have a FHA mortgage with a rate of 6% or greater, you may be able to do a streamline refinance to lower your payment, with little or no fees, and no appraisal.

Interest Rate Update:

Mortgage Type Interest Rate APR

30 Year Fixed 4.500% 4.780%
15 Year Fixed 4.250% 4.735%

Call today for your individual scenario rate quote.

*Interest rates as of 05/14/09. Interest rates and APR based on loan amounts not to exceed $417,000. Loan to values not to exceed 80%. 740+ credit score. Owner occupied only. Purchase and rate in term refinances. Not all applicants will qualify.

Aaron VanTrojen
President
Geneva Financial, LLC.
480-368-2000
aaron@genevafi.com