Weekly Information 7/30

The end of July usually marks the quietest time of the year for markets, but not this year. The slowdown beginning in May is now more trend than air-pocket, and every new data point matters. This morning’s news of sub-par 2nd Quarter GDP (+2.4%, half by inventory accumulation) has helped bonds and mortgages, pushing the 10-year T-note back down in the 2.90s. On Monday jumpy markets whipsawed after “New home sales soared 24% in June!” turned out to be a minor bounce from a deeper hole, May revised to a 53% drop from April. At mid-week, the MBA reported new mortgage applications still flat last week, and new claims for unemployment insurance fell 11,000, but are still running 450,000 weekly, where they've been stuck all year. June orders for durable goods were forecast to rise .5% (core), but fell .6%. The Conference Board’s index of consumer confidence plunked to 50.4; in prior recoveries it has averaged over 100, and at bottoms of prior recessions, 72. The Fed’s July “beige book” was distinctly softer than June, but had a public relations overtone, insisting that economic activity continued to “increase.” There is a great deal riding on Monday's ISM survey (the Chcago area had a big upward move, released today, which put a floor under stocks after the GDP data), and the gorilla for every month, next Friday's release of July payrolls. The bond market is pricing for a double-dip back to negative GDP, or close enough to get the Fed back in the game as a bond buyer -- the payroll data alone has the power to confirm weakness and take rates into the lower fours, or to blow us up.

Weekly Information 7/23

One line in Perfesser Bernanke’s testimony dominated the week, but in an odd way: it was an anti-forecast. “Uncertainty about the outlook for growth and unemployment is greater than normal....” The stock market took it as good news (in that NeverNever Land, the only uncertainty is how high it will go), but bond market people took it the other way, the 10-year T-note briefly 2.88%, a fifteen-month low. That mid-week low has reversed, mortgage rates ending the week slightly higher. Nothing in a thin week for economic data caused the reversal: housing stats were about as shaky as expected, June existing-home sales off 5%; and new claims for unemployment insurance jumped back up to 264,000 last week, the 2010 trend. Rates are wandering up because of a news vacuum: investors will not continue to bid rates down without confirmation that the post-May slowdown is still headed downhill, and the next meaningful reports are almost two weeks away. Our rates have been helped since spring by fears in and about Europe, and that benefit is on hold also. In the short run, the steep devaluation of the euro is a huge help to the exports of North Europe and those economies. Also, the European Central bank has temporarily stopped a run from Club Med bonds, and a parallel bank-on-bank run. Nobody in the bond market takes seriously the European bank stress tests, but the foregone conclusion, "All okay in here!", makes it impossible to read future ECB policy and masks true instability. The marker: if the 10-year T-note blows above 3.00% to 3.10% or higher, the bond market is buying recovery, or at least has lost fear of double-dip. Today's 2.95% says this is just a pause before more slowdown data can take us lower.

Top 10 Credit Don'ts During the Loan Process

Many are taking advantage of interest rates at historic lows, either by re-structuring debt with a refinance or purchasing a new home. However, the recent economic crisis has created even tougher guidelines and credit requirements and there are some things that consumers must be aware of when applying for a loan.

1. Don't do anything that will cause a red flag to be raised by the scoring system
2. Don't apply for new credit of any kind
3. Don't pay off collections or charge offs
4. Don't max out or over charge on your credit card accounts
5. Don't consolidate your debt onto 1 or 2 credit cards
6. Don't close credit card accounts
7. Don't pay late
8. Don't allow any accounts to run past due-even one day!
9. Don't dispute anything on your credit report
10. Don't lose contact with your mortgage and real estate professionals

Short Sales

Short Sales: A Growing Market

The last time Land Title published a technical bulletin about short sales was in 2006. Back then, short sales were rare and many people were unfamiliar with the term. Now, with over 20% of Colorado mortgages upside down* and short sales accounting for nearly 16% of home purchase transactions nationally in January,** it’s a hot topic and one that cannot be ignored. The number of these transactions is increasing, and Realtors are finding short sales are becom- ing a regular part of the real estate landscape.

What is a Short Sale?

A short sale or short payoff is generally defined as a sale in which a lender allows the property securing a mortgage or deed of trust to be sold for less then the existing loan balance, due to factors such as the borrower’s financial circum- stances, the property’s physical condition, or local real estate market conditions.

A short sale is really a form of pre-foreclosure sale that occurs when the mortgagee agrees to accept less than the loan amount to avoid foreclosure. A negotiated short sale may result in a discounted purchase price for the buyer. The buyer then finances the acquisition much the same as in any conventional real estate acquisition.

Complexity of Short Sales

Short sales are extremely complex transac- tions, even for the experienced Realtor. Part of the reason is that they are time-consuming. Lenders are inundated with requests for short sales and therefore expect all paperwork to be complete and accurate before even consider- ing a short sale. Lenders may also request that the paperwork be resubmitted multiple times, and just getting the file itself to the lender can sometimes present a challange.

Additionally, there is no regulation or industry standard for short sales, meaning every lender may have different requirements and expecta- tions. Even a Realtor who is familiar with the requirements of one lender may not know the ins and outs of another lender’s requirements. Furthermore, lenders’ policies and processes can change often and even vary by investor.

Managing a Short Sale

If you’ve successfully completed short sales in the past, you are aware of the incredible complexity of these transactions and the time- consuming nature of the work involved.

That’s why Land Title has teamed up with RealtyTMS, Colorado’s leading short sale spe- cialists, to assist our clients with their short sale transactions. With Land Title and RealtyTMS on your side, we’ll take hours of administrative time off your plate so you can focus on the dollar- producing activites you do best: lead genera- tion, marketing, networking, and sales.

This means you can handle more volume and keep your pipeline full, which is especially important in today’s real estate market.

Your Team of Specialists

If you choose to work with Land Title and RealtyTMS, you’ll find that it’s not just one person who manages your file — RealtyTMS will put their entire team to work for you, dili- gently contacting the banks for status updates and making sure the file is moving through the system. RealtyTMS regularly communicates with the listing agent, plus their online transac- tion management platform allows Realtors to log on and view status updates 24/7.

A Lengthy Process

Some Realtors have taken to referring to short sales as “long sales” because of the length of time it can take to complete these transac- tions. RealtyTMS also understands the value of keeping the buyer engaged during this time- consuming process, where it can take months to get lender approval. They work closely with the listing agent and keep all parties informed on the progress of the file at every stage as it moves through the system.

New to Short Sales?

For Realtors who are well-versed in short sales, Land Title and RealtyTMS want to be a trusted part of your short sale team, so you can hand off administrative tasks and focus on your clients.

If you are new to short sales, RealtyTMS and Land Title will also provide education and help

MARCH 2010

Navigating the Short Sale

LandTitlepartnerswithRealtyTMSTM tooffershortsaleservicetoRealtorsPage 2 Navigating the Short Sale

set expectations for you and your clients about what to expect from listing to closing.

Factors the Lender May Consider

What makes a lender decide whether to take a discount on a mortgage? What formula do they use to decide how much to take? These are tricky questions. Each of these transactions must be evaluated on a case-by-case basis, and there are a number of variables involved in each one.

A borrower is often in default or will be soon when the lender decides to take a discount. There may be instances where there is no default; this usually means that the borrower is upside down on the mortgage and what is owed exceeds the value of the house.

There are a number of factors that a lender may consider when deciding whether to discount a loan and by how much, including the borrower’s overall financial condition and circumstances, the property’s “as is” value, and the cost to market and re-sell the property. Also, two short sales at the same bank may actually be held

by different investors, so the percentages and “formulas” for approval may vary even with the same bank.

A short sale is usually the lender’s last resort before foreclosure. Overall, the goal is to show the lender that a short sale is the quickest and best way to mitigate their loss. Some lenders will only approve a short sale when foreclo- sure is not economically feasible because the borrower is insolvent and one or more of the following may have occurred:

• The property was purchased or refinanced at the top of a seller’s market at an over-inflated price, and a substantial drop in value has occurred.

• The property was financed as an interest-only adjustable rate loan and the borrower has no capacity to refinance at a lower interest rate.

• The property was refinanced at more than 100% of its value.

• The property is located in an area where property values have dropped due to local economic conditions, or the home’s value has decreased to an amount below the loan balance due.

• The property’s “as is” condition has deterio- rated to a point where it is not feasible for the lender to put it in a marketable resale condition.

• The proposed purchase price is more than the lender would be able to sell property for after foreclosure.

• Any sales commission proposed in a contract is less than what the lender may typically have to allocate after the foreclosure process is complete to market and sell the property.

The lender will also do a market analysis of the property. The Broker’s Price Opinion (BPO) may be the single most influential component the lender considers when deciding how much they are willing to accept as a reasonable short sale offer. The lender hires a real estate agent, broker, or appraiser to assess the property and give their professional opinion of its value to the lender.

Documentation

Most lenders ask the borrower to document their hardship prior to approval of the sale. The lender will request at least the following informa- tion for consideration of a short sale:

• a personal hardship letter that defines what the hardship is and proof of the hardship claim, if available;

• a Third Party Disclosure for authorization to speak to the Realtor or other representative about the loan status;

• a completed financial worksheet of net income and monthly expenses;

• copies of the last two years’ Federal Income Tax returns with all schedules;

• copies of last two months’ payroll stubs, or profit-and-loss statement if self employed;

• copies of last two months’ bank statements for all accounts;

• a copy of the sales contract signed by both the seller and the buyer; and

• estimated closing costs showing a detailed breakdown of all projected costs including Realtor commissions for listing and selling agents.

Once the lender has the above information, it could take three to twelve months to negotiate and close a short sale, depending on the lender. It really is a “numbers game,” with the lender in control.

Not every homeowner facing foreclosure is a good short sale candidate. A giant step to getting a lender to consider your short sale proposal is to have as much information ready as possible to expedite the process, and to work with short sale specialists — like Land Title and RealtyTMS — who understand the different lender requirements and systems at the banks.

Cool Tip

As we enter the peak of the summer heat, consider green strategies for home cooling:

- Purchase a properly-sized unit. Air conditioners that are too large or small for the area they're meant to cool will run inefficiently, waste energy, and wear out more quickly than a properly-sized one.

- Confirm that the level of refrigerant charge and the airflow across the indoor coil meets the manufacturer’s recommendation. It's estimated that more than 60 percent of central air conditioners are incorrectly charged during installation. Incorrect refrigerant levels can lower efficiency by 5 to 20 percent.

- Change filters to prevent dust and dirt from building up. Check filters monthly and switch them out if they're dirty. At minimum, change them every three months.

Weekly Information 7/16

Mortgage interest rates improved this past week as economic data was mostly weaker than expected. June Retail Sales fell 0.5% on expectations that sales would fall by 0.2%. Excluding automobiles, sales fell by 0.1% on expectations that they would be unchanged. The July New York Fed Empire State Manufacturing Index along with the July Philadelphia Fed Business Index were much weaker than expected. Today’s University of Michigan Consumer Sentiment Index fell to 66.5, an 11 month low. Also of note, inflation continues to be low. The June Consumer Price Index (CPI) fell 0.1% on expectations that it would be unchanged. Year over year CPI is up 1.1%. June Core CPI, excluding the food and energy components, increased 0.2% on expectations that it would increase 0.1%. Year over year, though, core CPI increased just 0.9%, the smallest increase since 1966.

Portfolio.com: Colorado has 3 of nation's top 10 mid-sized business markets - Denver Business Journal

Portfolio.com: Colorado has 3 of nation's top 10 mid-sized business markets - Denver Business Journal

10 Ways to Prepare for Homeownership

1. Decide what you can afford. Generally, you can afford a home equal in value to between two and three times your gross income.
2. Develop your home wish list. Then, prioritize the features on your list.
3. Select where you want to live. Compile a list of three or four neighborhoods you’d like to live in, taking into account items such as schools, recreational facilities, area expansion plans, and safety.
4. Start saving.Do you have enough money saved to qualify for a mortgage and cover your down payment? Ideally, you should have 20 percent of the purchase price saved as a down payment. Also, don’t forget to factor in closing costs. Closing costs — including taxes, attorney’s fee, and transfer fees — average between 2 and 7 percent of the home price.
5. Get your credit in order.Obtain a copy of your credit report to make sure it is accurate and to correct any errors immediately. A credit report provides a history of your credit, bad debts, and any late payments.
6. Determine your mortgage qualifications.How large of mortgage do you qualify for? Also, explore different loan options — such as 30-year or 15-year fixed mortgages or ARMs — and decide what’s best for you.
7. Get preapproved. Organize all the documentation a lender will need to preapprove you for a loan. You might need W-2 forms, copies of at least one pay stub, account numbers, and copies of two to four months of bank or credit union statements.
8. Weigh other sources of help with a down payment. Do you qualify for any special mortgage or down payment assistance programs? Check with your state and local government on down payment assistance programs for first-time buyers. Or, if you have an IRA account, you can use the money you’ve saved to buy your fist home without paying a penalty for early withdrawal.
9. Calculate the costs of homeownership. This should include property taxes, insurance, maintenance and utilities, and association fees, if applicable.
10. Contact a REALTOR®. Find an experienced REALTOR® who can help guide you through the process.

Weekly Information 7/9

Mortgage interest rates were mostly flat on the week with little economic data for the markets to digest. Of note, the June ISM Services Sector Index came in at 53.8, weaker than the 55 expected. Weekly jobless claims fell be 21k on expectations that they would fall by 12k. May Consumer Credit fell by $9.1 billion on expectations that it would fall by $3.1 billion. April Consumer Credit was revised lower. April Consumer Credit fell by $14.9 billion from the originally reported increase of $1 billion. Both numbers indicate that consumer spending is soft. May Wholesale inventories increased 0.5%, in line with expectations. Also, the Treasury announced that it will auction $69 billion in debt next week.

SmartRegs for Energy Efficient Rental Properties

SmartRegs for Energy Efficient Rental Properties

Weekly Information 7/2

Mortgage interest rates improved slightly on the week on generally weaker than expected economic data. Today’s employment report for June showed Non-Farm Payroll losses of 125k on expectations that payrolls would fall by 100k. Most of the job losses were driven by the cut of 225k temporary census workers. The private sector added 83k jobs, lower than the 112k expected. June average hourly earnings fell by 0.1%, its first decline in several months. Other economic data weaker than expected included June Consumer Confidence, the ADP Private Job Estimate for June, the Chicago Purchasing Managers Index, weekly jobless claims, the June ISM Manufacturing Index, and May Pending Home Sales. May Pending Home Sales fell by 30% on expectations that sales would be down 12.5%. Year over year sales are down 16%. May Personal Income and Spending were in line with expectations.

Pending home sales 'fell off a cliff'

NEW YORK (CNNMoney.com) -- The experts expected home sales to drop once the homebuyer tax credit lapsed at the end of April, but the depth of the decrease was shocking.
According to the National Association of Realtors (NAR), pending home sales fell a whopping 30% in May. Their index, which measures signed sales contracts but not closed sales, plunged to 77.6 from 110.9 in April. It's even off 15.9% from a year ago when the nation was barely emerging from the recession.

"The pending home sales report is a disaster," said Mike Larson, a real estate analyst for Weiss Research. "Sales fell off a cliff after the tax credit expired. It's the biggest monthly decline ever and the index is at its lowest level since NAR began tracking it in 2001."
Lawrence Yun, NAR's chief economist downplayed the damage a bit. According to him, customers rushed into deals to claim the credit, borrowing from May sales. Once the economic recovery comes into full swing, housing markets will heat up.
"If jobs come back as expected, the pace of home sales should pick up later this year," said Yun, "and reach a sustainable level of activity given very favorable affordability conditions."
Those conditions include much lower home prices and extremely favorable mortgage interest rates. The question is when -- or if -- the job market will ever bounce back.
"We're not creating jobs," said Larson. "The housing problems now are being driven by broad economic problems."