HUD Toughens FHA Program

January 20, 2010 by  
Filed under Mortgage Updates

HUD Toughens FHA Program
The FHA announced changes to its mortgage insurance program today intended to shore up its capital reserves and increase lender enforcement. FHA Commissioner Dave Stevens said the upfront fee on FHA loans will increase 50 basis points from 1.75 percent to 2.25 percent sometime in the spring, and HUD will ask Congress for the authority to increase the annual fee past its statutory cap of 0.55 percent. FHA borrowers with credit scores less than 580 will be required to make a 10 percent down payment instead of the traditional FHA minimum of 3.5 percent. Some industry observers noted that most lenders aren’t doing business with credit scores less than 620. In addition, HUD will reduce allowable seller concessions from 6 percent to 3 percent and pursue legislative authority to require that FHA lenders indemnify the agency for loans they originate or underwrite.

Mortgage Forecast for 2010

January 11, 2010 by  
Filed under Mortgage Updates

The first full week of the new year wasn’t one of the more encouraging weeks. It began with a dour report on pending home sales, which tumbled 16% in November, raising concerns among many economists that the housing recovery could be poised for a relapse.

The most repeated explanation for the drop in pending sales was that October’s numbers were buoyed as buyers rushed in to take advantage of the federal tax credit before its initial expiration on November 30. Of course, we now know that the credit has been extended through April and expanded to include a $6,500 incentive for some buyers who already own a home.

The good news is the November report did not account for the new-and-improved federal tax credit. So after we work through November’s bout of housing dyspepsia, we will likely see sales rates gradually pick up and home inventories gradually decline.

That is, if employment – the most important variable in any recovery – improves. The news is not as encouraging as we would have liked. Friday’s employment report showed the official unemployment rate held steady at 10% for December, though employers shed an unexpectedly high 85,000 jobs.

The first question that pops to mind is, “How can the unemployment rate hold steady if job losses increased?” Once people stop looking for jobs, they are no longer counted among the unemployed, which is why there is a supplemental employment report. When discouraged workers and part-time workers who would prefer full-time jobs are included, the “underemployment” rate in December rose to 17.3% from November’s 17.2%.

December’s employment numbers have led a few pundits to believe the job situation will not improve much in 2010. We think it is too soon to consider throwing in the towel. It’s worth noting that the Federal Reserve still thinks the economy is improving, saying in the minutes of its last meeting of the Fed governors that “ economic growth was strengthening in the fourth quarter, that firms were reducing payrolls at a less rapid pace, and that downside risks to the outlook for economic growth had diminished a bit further.”

It is not a ringing endorsement of the economy, to be sure, but it is an endorsement.



The Big Overhang

The Federal Reserve is on lenders’ minds these days, and for good reason: They are concerned how the Fed’s plan to wind down purchases of mortgage-backed securities will influence the lending market.

Over the past year, the Fed has bought $1.25 trillion of mortgage-backed securities to ease lending markets and keep longer-term rates low. The program has succeeded on that front by pushing mortgage rates below 5% to levels unseen since the early 1950s. The big fear now is that when the Fed stops purchasing these mortgage-backed securities (and that is the plan for late March) mortgage rates will start rising and the housing market will start back peddling.

We think the fears over a rate-induced reversal are overdone. Lower rates have done their job, but they have done about all they can do. We’ve argued in past editions that a rising interest-rate environment wouldn’t be the worst thing to happen, because it would motivate people to act, particularly if rising rates are accompanied with rising economic activity and rising employment levels – both of which we still see as likely for 2010.

When the economy does officially improve, all the goodies we have become accustomed to will go away as well. However, that is not bad either. Sound markets are reflective of their ability to stand on their own two feet. At this point, just about everybody would like to see the mortgage and housing markets do just that.

In the meantime, mortgages rates and home prices remain very attractive. We just cannot say for how long. With the proposed changes in FHA lending standards, likely additional mortgage-market oversight, April’s impending expiration of the federal home buyer’s tax credit, and the Fed backing out of the mortgage securities market, the deals we see today might not be so attractive a few months down the road.

Treasury Department Streamlines Short Sale

January 6, 2010 by  
Filed under Real Estate Politics & Regulations




Treasury Department Announces Program to Streamline Short Sales

On November 30, 2009, the Treasury Department released guidelines and forms for its new Home Affordable Foreclosure Alternatives Program (HAFA). HAFA is component of the Home Affordable Modification Program (HAMP). NAR has been urging the Obama Administration for months to take action to address the many problems with short sales.

HAFA provides incentives in connection with a short sale or a deed-in-lieu of foreclosure (DIL) used to avoid foreclosure of a loan eligible for modification under the HAMP program. HAFA applies to loans not owned or guaranteed by Fannie Mae or Freddie Mac, which will issue their own versions in the coming weeks. Program features include: pre-approving sales terms before listing the property, prohibiting servicers from requiring reductions in real estate commissions that do not exceed 6 percent, paying incentives, releasing borrowers from future liability for the unpaid portion of the first mortgage debt, and imposing deadlines at each stage.

The program does not take effect until April 5, 2010, but servicers may implement it before then if they meet certain requirements. The program sunsets on December 31, 2012.

My Property Taxes Are Too High What Do I do?

January 6, 2010 by  
Filed under Real Estate Politics & Regulations


Property owners sometimes feel that the department’s estimate of their property value is wrong. The assessment appeal process is available to allow property owners the opportunity to dispute the value determined by the department. Property values rise and fall to reflect the market. A property owner should file an appeal when they believe that their property is not valued at its current market value.

Appeals may be filed on three occasions:

  1. upon receipt of an assessment notice;
  2. by a petition for review; and
  3. upon purchase of property between January 1 and June 30.


Property owners will normally receive a Notice of Assessment every three years that shows the old market value as well as the new market value. The new value reflects the market influence and other conditions affecting the property from the time of the last assessment.

If you decide to appeal, the first step is to reply to the Notice of Assessment by signing and returning the appeal form within 45 days of the date of the notice. Following this, a personal or telephone hearing will be scheduled. Appeals can also be made in writing, eliminating the need for a hearing.


If events have occurred since your last regular assessment that you believe have caused your property value to decline or if you failed to respond to the Notice of Assessment within the required time frame, you may file for a petition for review by January 1 of any year. Click here to obtain a Petition form. The completed form should be mailed to your local assessment office. After filing the petition, you will be scheduled for a hearing; or, if you prefer, your written submission can be reviewed eliminating the need for a hearing.


If you purchase a property and the property is transferred after January 1 but before July 1, you may file an appeal within 60 days of the transfer. After filing a written appeal, you will be scheduled for a hearing; or, if you prefer, your written appeal can be reviewed instead of having a hearing.


The first level of the appeal process, known as the Supervisor’s level, is informal. You will present your case to an assessor designated by the Supervisor of Assessments. Typically, hearings at this level take approximately 15 minutes.

You can obtain a copy of the worksheet for the property free of charge from your local assessment office. The information on the worksheet will be reviewed at the time of the hearing to assure its accuracy.

For assistance in estimating the value of your property, you can obtain sales data from various sources, including: sales listings located in the local assessment office; commercially available sales reports and other information available at local libraries; local Real Estate offices; personal surveys of recently sold comparable properties in the area; and local listings of sales transactions in the newspaper. For a nominal fee, worksheets of comparable properties may be obtained from the assessment office.

To be most effective, you should:

  • Focus on those points that affect the value of your property.
  • Indicate why the Total New Market Value does not reflect the market value of the property.
  • Identify any mathematical errors on the worksheet or inaccurate information describing the characteristics of the property (such as the number of bathrooms, fireplaces, etc.).
  • Provide examples of sales of comparable properties which support your findings as to the value of the property.
  • Avoid the following issues since they are not relevant to the value under appeal: comparison to past values, percent of increase, additional metropolitan costs, the amount of the tax bill, properties in other taxing jurisdictions, and services rendered or not rendered.

Your first level hearing should be viewed as an opportunity to present evidence which would indicate that the department’s value of the property is inaccurate.


Following the hearing, you will receive a final notice. If you disagree with the decision, you can appeal to the next step which is to the Property Tax Assessment Appeal Board. The second step appeal must be filed within 30 days from the date of the final notice from the Supervisor of Assessments.

There is an independent appeal board comprised of 3 local residents in each of the counties and Baltimore City. Property owners generally need no assistance at this step, no fees are required, and they are free to present any supporting evidence. You can obtain a list of the comparable properties that will be used by the assessment office before the Board if you file a written request to the assessment office at least 15 days before the scheduled date of the hearing.


If you are dissatisfied with the decision made by the Appeal Board, you can file an appeal within 30 days of the date of the board’s decision to the Maryland Tax Court. The Maryland Tax Court is an independent body appointed by the Governor. Although the proceedings are more formal than the first 2 levels, it is still considered to be an informal, administrative hearing. Property owners who are in disagreement with the Tax Court’s decision can appeal further through the regular judiciary system. Here you will probably need legal counsel.


The assessment appeal process is a mechanism intended to assure an accurate property valuation. If you believe that the value placed upon your property is higher than it should be and if you can provide supporting evidence (such as sales information for properties comparable to your own), then it is in your best interest to appeal.