Dept of Justice details foreclosure settlement with banks

In the largest deal to date aimed at addressing the housing meltdown, federal and state officials on Thursday announced a $26 billion foreclosure settlement with five of the largest home lenders.
The deal settles potential state charges about allegations of improper foreclosures based on "robosigning," seizures made without proper paperwork.

Most of the relief will go to those who owe far more than their homes are worth, known as being underwater on the loans. That relief will come over the course of the next three years, with the banks having incentives to provide most of the relief in the next 12 months.

At least $17 billion of the settlement will go to reducing the principal owed by homeowners who are both underwater and behind on their mortgages. Depending on which loans have the amount owed cut, the amount of principal relief could reach as much as $34 billion.
Federal officials say that portion of the settlement will provide relief for up to 1 million of the most beleaguered homeowners. But if that many homeowners get the amount they owe reduced, it would only be an average reduction of $17,000 in their principal.

Given the fact that many homeowners are far more underwater and will need steeper reductions in order to be able to afford their payments, the number of homeowners who receive help under this part of the program will likely fall far short of the 1 million mark.

Officials say up to 750,000 other homeowners who are underwater but are current on their mortgages will be able to refinance their current loans at lower rates. They will not receive a reduction in principal, but with mortgage rates now near record lows, they could receive substantial savings on their monthly payments. The settlement sets aside $3 billion to account for the reduced interest payments the banks will receive after the refinancing.

About $1.5 billion of the settlement will to go homeowners who had their homes foreclosed upon, which will come to about $2,000 per homeowner.

The deal is the second biggest settlement involving the states ever reached, trailing only the $206 billion settlement reached in 1998 between state attorneys general and the tobacco industry. And it dwarfs any settlements that major Wall Street firms have reached to settle other allegations of misdeeds related to the financial markets meltdown and the Great Recession.

As of Wednesday night, at least 42 had signed on onto the settlement. which would yield as much as $26 billion available for qualified homeowners. The deal marks the largest housing relief available "underwater" homeowners whose principal exceeds their home's value, as well as those who have been foreclosed on, since the financial crisis began.

Housing Markets Improving

Data released earlier this week indicates that the number of improving housing markets nearly doubled in January, providing the latest evidence of a real estate turnaround.

Seventy-six markets are now on the upswing, according to the Improving Markets Index, a monthly release prepared by the National Association of Home Builders (NAHB) and the First American Financial Corporation. That represents an increase of 35 markets from the December release, which listed 41 markets as improving. The index classifies a market as improving if it posts an increase in jobs, home prices and single-family housing permits for at least six months.

"The substantial gain in the number of improving housing markets in January shows that more consumers are looking favorably at a home purchase in light of today's historically low interest rates and attractive prices," said Kurt Pfotenhauer, vice chairman of First American Title Insurance Company. The average rate of a 30-year-fixed mortgage dropped to match the lowest on record last week, with Freddie Mac putting the number at 3.91 percent.

Most of the cities that joined the list are relatively small metropolitan areas, NAHB chief economist David Crowe notes. But a few major cities, including Dallas, Denver and Philadelphia, also made the cut.

Beyond just the general increase in the number of improving markets, the data is also encouraging because of the wide geographical distribution of the recuperating cities, NAHB Chairman Bob Nielsen said. The generous spread of improving cities suggests that a possible recovery is not concentrated only in certain pockets of the country.

The newly released data is the latest harbinger of good news for the housing market in 2012.  Pending home sale hit a year and a half high in November, while total home sales rose 4.0 percent the same month, according to the National Association of Realtors. Residential construction ticked up 2 percent in November, The Commerce Department said earlier this month.

Despite the positive signs, the foreclosure crisis could continue to be a "lingering problem in 2012, NAHB senior economist Robert Denk told AOL Real Estate.

"Things are not great, but they are coming down," he said. "There's no imminent threat that things are going to get worse on that front."

The National Association of Home Builders, which prepares the index with The First American Financial Corporation, is a trade group that represents more than 160,000 members involved in home building. The First American Financial Corporation provides title insurance and settlements services to the real estate and mortgage industries. If you are in the market for a home at the lake, please let our team work with you. Call the Spouses Selling Houses. Until next time!! Ebbie :)

To Build or Buy an Existing Home?

Upgrading to a new home? You can buy a brand-new home in one of three ways: buying a house already built on spec; having a semicustom home built as part of a development (you can choose from a set palette of finishes and upgrades); or having a purely custom home designed and built to your specifications.
But don't get so caught up in the sparkling new paint and granite countertops that you forget to make a good deal!

Evaluate the pros and cons of a new home

• New homes are typically far from the city center; will you mind the commute?
• Are you willing to coax a new lawn into existence, and can you wait 20 years for sapling trees to mature?
• Will the cookie-cutter nature of new subdivisions drive you bonkers?
• New houses tend to be built right on top of each other. Do you mind the closeness and potential lack of privacy?

Evaluate the new neighborhood

• Check with the developer about potential Homeowner's Association (HOA) fees and rules; some are incredibly expensive -- and strict. They may not allow storage sheds, certain paint colors or finish materials, solar panels or even vegetable gardens. Be sure to find out if the HOA can assess penalties for infractions.
• Ask whether cable and Internet are readily available and from what companies; your new house will be wired for cable but that does not mean the cable company offers service to your neighborhood.
• If the development is still under construction, you'll be dodging giant contractor trucks and facing jackhammering at 7 a.m. for a while.

Be agent-savvy

• Many states regulate how agents deal with new subdivisions. If you have your own agent, (and you should) tell him up front that you're interested in looking at new homes.

Get the Skinny on Your Builder

• Make sure there are no Better Business Bureau complaints on file against your builder's company.
• Ask your agent if the builder has a good reputation in the community.
• Visit your builder's previously constructed homes; ask the occupants whether the craftsmanship has stood up to time, use and weather.

Upgrade the smart way

• The markup on upgrades is substantial, so investigate each option you're considering to see whether it would be cheaper to bid it out after you move in.
• Builders, in general, need to sell quickly to make a profit. If you're stuck haggling over price, get them to throw in the upgrades you want at a reduced cost or for free -- it's a way to get more value that's appealing to both sides.

Don't skip the inspection

• Never assume that because a home is newly constructed, it isn't going to have defects. Make your sales contract contingent on a final inspection by a professional you hire.
• If possible, have the home checked during each phase of building, when potential problems are easier to spot. If the builder objects to this, consider it a red flag.
• Know that municipal inspections for code violations are nowhere near as thorough as an independent professional inspection is.

Protect yourself with warranties

• All new homes come with an implied warranty from the builder stipulating that any major defect of the structural integrity of the home must be repaired.
• You should ask for a builder's warranty for a period of time following move-in (a year, for example) that covers any defects in craftsmanship.
• Preferably, this warranty should be backed by insurance.
• Make sure any warranty you receive explicitly states what is covered and what isn't, and what the limitations for damages are.
• For extra peace of mind (which we're fans of), whip out your real estate attorney again and have her look over the warranty to make sure it's kosher.

And if you're looking for an existing home, of course we would love to help with that as well. Please give the Spouses Selling Houses a call. Until next time!! Ebbie :)

Banks to "Loosen" credit standards?

Capital Economics expects the housing crisis to end this year, according to a report released Friday. One of the reasons: loosening credit.
The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago.
Additionally, a Fed Senior Loan Officer Survey found credit requirements in the fourth quarter were consistent with the past three quarters.

However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.
Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.
Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”

In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.
While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in the month of November, 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan.
Additionally, Capital Economics says “any improvement in credit conditions won’t be significant enough to generation actual house price gains,” and potential ramifications from the euro-zone pose a threat to future credit availability. Let us help you find the home of your dreams, and guide you through the entire process. Until next time. Thank you, Ebbie :)