The  Pending Home Sales Index, a forward-looking indicator, rose 5.2 percent to 79.4 based on contracts signed in July from a downwardly revised 75.5 in June, but remains 19.1 percent below July 2009 when it was 98.1. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, cautioned that there would be a long recovery process. “Home sales will remain soft in the months ahead, but improved affordability conditions should help with a recovery,” he said. “But the recovery looks to be a long process. Home buyers over the past year got a great deal, and buyers for the balance of this year have an edge over sellers. For those who bought at or near the peak several years ago, particularly in markets experiencing big bubbles, it may take over a decade to fully recover lost equity.”

Yun added, “Affordability could reach a generational high in the second half of this year because of rock-bottom mortgage interest rates, helped partly by the Fed’s very accommodative monetary policy. The loan underwriting standards are tighter, but home buyers can improve their chances of getting a loan by staying well within their budgetaltors®.

The PHSI in the Northeast rose 6.3 percent to 62.5 in July but is 21.1 percent below a year ago. In the Midwest the index increased 4.1 percent to 66.7 but remains 25.7 percent below July 2009. Pending home sales in the South rose 1.2 percent to an index of 86.3, but are 15.6 percent lower than a year ago. In the West the index jumped 11.6 percent to 95.0 but is 17.6 percent below July 2009.

The national index had fallen 29.9 percent in May and another 2.8 percent in June.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

Existing-home sales for August will be reported September 23 and the next Pending Home Sales Index will be on October.

Call David if you have any questions……239-596-1181 or email dave@BartleyRealty.com

The latest reports shows that Fannie and Freddie owned 30.5 million mortgages at the end of September. Of those loans, 25.4 million were prime mortgages while 5.1 million were subprime financing.

Assuming we have about 50 million homes with mortgages in the U.S. — the estimate used by the Mortgage Bankers Association — then Fannie and Freddie plainly hold a huge and important chunk of the marketplace.

Okay, so what’s happened with all those Fannie and Freddie loans?

Here’s where we get to the good news: If we compare foreclosure starts to the number of Fannie Mae and Freddie Mac loans outstanding then federal figures for September look like this:

There were 22,495 foreclosures (.089 percent of 25.4 million loans) were started against prime borrowers.

There were 18,474 foreclosure actions (.36 percent of 5.1 million loans) started with subprime borrowers.

Not all foreclosure starts, of course, result in sales on the courthouse steps. In fact, government figures show that only about a third (32.7 percent) of all foreclosure starts with Fannie Mae and Freddie Mac actually result in the loss of a home.

“Fannie Mae and Freddie Mac are the largest buyers of U.S. mortgages so they’re crucially important to borrowers, lenders and investors nationwide,” says Jim Saccacio, chairman and CEO at RealtyTrac.com, the leading source of foreclosure listings and data. “For example, the recent winter-time foreclosure moratoriums started by Fannie Mae and Freddie Mac set a precedent that others in the mortgage field can easily copy.

“We associate Fannie Mae and Freddie Mac with conventional loan standards,” Saccacio continued. “One value of those benchmarks can be seen in the form of the relatively low foreclosure levels both companies enjoy at a very tough time in the marketplace.”

While the figures are not precisely comparable, the Mortgage Bankers Association says in the third quarter of 2008 that the non-seasonally adjusted foreclosure start rate for prime loans was 0.61 percent and 4.23 percent for subprime loans.

By any reasonable standard Fannie Mae and Freddie Mac are doing great. Despite difficult times they have substantially lower foreclosure rates than lenders in general.

Curiously, the Federal Housing Finance Agency (FHFA), the federal office which oversees Fannie Mae and Freddie Mac, has a different story to tell. Instead of looking at foreclosures and all the loans held by Fannie and Freddie, it has instead put out a news releaase which tells us the percentage of delinquent loans that have been converted into foreclosure starts.

“Loans for which foreclosure was started as a percent of loans 60+ days delinquent declined from 8.29 for the first quarter and 7.81 percent for the second quarter to 7.12 percent for the third quarter.”

If you’re a headline writer, 7.12 percent sure seems bigger — and more newsworthy — than the much smaller percentages which could be shown by looking at foreclosures and the total number of outstanding Fannie Mae and Freddie Mac loans.

Usually companies and federal agencies like to put out good news — say bigger profits or smaller losses — but that can’t be done at FHFA. If the agency explains how well Fannie and Freddie are doing it raises the question of why the two government-sponsored enterprises (GSEs) were taken over by the federal government in the first place.

The Take-Over
You’ll remember last July federal regulators said “the Enterprises’ $95 billion in total capital, their substantial cash and liquidity portfolios, and their experienced management serve as strong supports for the Enterprises’ continued operations.”

There’s no question that Fannie Mae and Freddie Mac have some percentage of failing loans within their portfolios but that’s hardly unusual — all lenders, in all markets, have some loans that don’t work out precisely because lending is not a risk-free business.

It’s equally true that both companies had massive reserves plus the ability to borrow more in mid-summer. Yet just a few weeks later they were taken over by the federal government in September because “as house prices, earnings and capital have continued to deteriorate, their ability to fulfill their mission has deteriorated. In particular, the capacity of their capital to absorb further losses while supporting new business activity is in doubt.”

How well the two companies are actually doing at year-end is unclear. About a month after they were placed under a federal control government regulators announced that “it is prudent and in the best interests of the market to suspend capital classifications of Fannie Mae and Freddie Mac during the conservatorship, in light of the United States Treasury’s Senior Preferred Stock Purchase Agreement.”

Prudent for whom? In who’s best interest? Certainly not the shareholders — they lost billions of dollars in equity during the past year as stock prices in the two companies fell to less than a buck.

In the first half of the year, Fannie Mac had a loss of $4.5 billion. In the third quarter the reported loss was $29 billion. At Freddie Mac the results were smaller but similar: During the first two quarters the company lost $972 million while in the third quarter it dropped $25.3 billion. In November the Treasury transferred $13.8 billion to Freddie Mac and the Federal Reserve announced that it would purchase mortgage-backed securities worth as much as $500 billion from Fannie Mae, Freddie Mac and Ginnie Mae.

Financial Flexibility
This is all routine stuff except for one notable curiosity: Fannie Mae and Freddie Mac are actually doing better than public reports suggest. Much better.

How can that be? Very simple. Financial reports allow for considerable latitude. Usually such flexibility is a license for companies to claim the largest possible quarterly profits, but there’s surely no rule which says corporate leaders cannot be more conservative.

For instance, Freddie Mac reported that for the third quarter “results were driven primarily by a non-cash charge of $14.3 billion related to the establishment of a partial valuation allowance against the company’s deferred tax assets, $9.1 billion in security impairments on available-for-sale securities and $6.0 billion in credit-related expenses arising from the dramatic deterioration in market conditions during the third quarter, including declining home prices, increasing unemployment, a significant decline in consumer spending and a considerable tightening of both consumer and business credit.”

In other words, not a nickel of the $14.3 billion, the $9.1 billion or the $6 billion — a total of $29.4 billion — was actually lost, instead the money was set aside just in case. Such beefed-up reserves were used to lower company earnings to produce that well-publicized $25.3 billion loss.

Meanwhile, Freddie’s cash and cash equivalents rose from $8.6 billion at the end of 2007 to $50.2 billion at the start of October 2008 — BEFORE the Treasury contribution.

Unlike Freddie Mac, Fannie Mae has received no federal money. Its third quarter loss of $29 billion is also the byproduct of financial flexibility, results “driven primarily by a $21.4 billion non-cash charge to establish a valuation allowance against deferred tax assets, as well as $9.2 billion in credit-related expenses arising from the ongoing deterioration in mortgage credit conditions and declining home prices.”

What do we see looking at Fannie Mae’s cash? You might expect the vault shelves to be dry but that’s not the case: cash and cash equivalents went from $3.9 billion at the end of 2007 to $36.3 billion at the end of September 2008.

The obvious question that arises is this: Why has it been necessary to nationalize two companies that have operated without fail, seen their cash hoards grow in the worst market since the 1930s and have lower foreclosure levels than most industry competitors?

The Refinance Index increased 17.1 percent from the previous week and was the highest Refinance Index observed in the survey since the week ending May 15, 2009. The seasonally adjusted Purchase Index decreased 3.4 percent from one week earlier. The unadjusted Purchase Index decreased 4.6 percent compared with the previous week and was 38.6 percent lower than the same week one year ago.
 
The four week moving average for the seasonally adjusted Market Index is up 2.6 percent.  The four week moving average is up 0.1 percent for the seasonally adjusted Purchase Index, while this average is up 3.2 percent for the Refinance Index.

The refinance share of mortgage activity increased to 81.4 percent of total applications from 78.1 percent the previous week, which is the highest refinance share observed since January 2009. The adjustable-rate mortgage (ARM) share of activity decreased to 5.7 percent from 5.9 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages increased to 4.60 percent from 4.57 percent, with points increasing to 0.92 from 0.89 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.  The effective rate also increased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.99 percent from 3.95 percent, with points decreasing to 1.05 from 1.08 (including the origination fee) for 80 percent LTV loans. The effective rate also increased from last week.

The average contract interest rate for one-year ARMs decreased to 6.90 percent from 7.00 percent, with points decreasing to 0.21 from 0.22 (including the origination fee) for 80 percent LTV loans.

In judicial foreclosure states like Florida, borrowers sign two separate instruments: the note (or bond), which is evidence of the borrower’s promise to pay the debt; and the mortgage, which is the legal instrument that creates the lien on the property as security for the debt. If the borrower cannot pay the mortgage, the lender hires an attorney, who begins legal action to protect the lender’s interest. The attorney files several documents: a summons directing the borrower (defendant) to appear in court, a complaint describing the lenders (plaintiffs) allegations of entitlement to relief and the relief sought, and a lis pendens, the legal document that gives notice to the world that there is a legal action pending on the property. lis pendens is a Latin word meaning “lawsuit pending.” The documents are filed with the clerk of the court in the county where the property is located.

If the borrower fails to respond to the notices within the statutory time limit, the attorney submits a report to the court requesting that the court appoint a referee. The referee reviews the facts and circumstances in the foreclosure action and renders a report to the court. Then a judge issues a Judgment of Foreclosure and Sale in favor of the foreclosing lender. The judicial auction is advertised and the property is sold at the auction to the highest bidder.

If you have any questions email me at dave@BartleyRealty.com or call me at 239-596-1181. At Bartley Realty Services we are here to help you!

   Bartley Realty is announcing the statistics for July 2010.  Please give us a call if you have any questions.  Look at our properties at www.BartleyRealty to see all of the properties in Naples.

The Naples Beach area leads the way to the market recovery with strong summer sales according to a report released by the Naples Area Board of REALTORS® (NABOR), which tracks home listings and sales within Collier County (excluding Marco Island). Overall pending sales in the Naples Beach area increased 13 percent with 112 contracts in July 2010 compared to 99 contracts in July 2009.

“The median closed price for single-family homes in the Naples Beach area increased 123 percent.”  The Naples Beach median closed price for single-family homes increased to $1,117,000 in July 2010 up from $500,000 in July 2009.

The available inventory declined 7 percent to 8,731 in July 2010 compared to 9,359 in the same month last year.

“The fact that the month’s supply continues to go down and the median price is slowly increasing, indicates the Collier Real Estate market is continuing to recover. The overall median closed price for properties over $300,000 increased in July 2010 compared to the same month last year.”  

Overall pending sales in the $1 million to $2 million category increased 82 percent with 31 contracts in July 2010 compared to 17 contracts in July 2009. For the 12 months ending July 2010, overall pending sales increased 28 percent with 9,785 contracts compared to 7,655 contracts for the 12 months ending July 2009.

For the 12 months ending July 2010, pending sales increased 15 percent with 5,096 contracts compared to 4,443 contracts for the 12 months ending July 2009.

Condo pending sales saw a 6 percent increase with 328 contracts in July 2010 compared to 309 contracts in July 2009.

The overall median closed priced increased 17 percent to $201,000 in July 2010 up from $172,000 in July 2009.

The report provides annual comparisons of single-family home and condo sales (via the SunshineMLS), price ranges, geographic segmentation and includes an overall market summary. The statistics are presented in chart format, along with the following analysis:

“We saw a 24 percent decrease in the days a property was on the market in the 1 million to 2 million category, and a 25 percent decrease in the 2 million and above category. This bodes well for the high end of the market,” The average days a property was on the market in July 2010 decreased in the 1 million and above price categories compared to July 2009.

Home mortgages insured by the Federal Housing Administration have helped put more than 34 million Americans into their own homes since the since the 1930s. Millions more have benefited from zero-down VA loans from the U.S. Department of Veterans Affairs and from the Department of Agricultures Rural Development loans. Mortgage guarantees and down payment assistance are also doled out by municipalities and state programs such as California’s Housing Finance Agency.

It’s hard to generalize about their pros and cons with so many government-enabled loans out there. But when we compare them to conventional (non-government) loans, a few observations arise.

FHA loans normally demand higher interest rates than conventional mortgages because of the increased risk of default. The “spread” between FHA and conventional loans are usually about  .25 percent. The spreads do add up, for instance you borrow $200,000 for 30 years at 5 percent fixed and you’ll pay $1,073 monthly. Make it 6 percent and you’ll pay $1,199. It’s an extra $45,360 over 30 years.

Why have so many buyers chosen FHA loans? Not because they like higher interest. It’s about lower down payments. An FHA-backed loan today can be had for about 3.5% percent down, even by someone without stellar credit. The same borrower might be asked for 20 percent down by a lender without the FHA guarantee.

But there are complicating factors. FHA borrowers must pay an upfront fee of 1.75 percent of the loan amount, plus an annual insurance premium of 0.5 percent. That premium is about the same as what’s paid by a conventional borrower who must carry Private Mortgage Insurance (PMI).

A higher-interest-rate FHA mortgage may cost less in the long run than a conventional mortgage with PMI, but there is no overarching rule. You have to run the numbers and compare. For many borrowers, the deal “maker” or “breaker” won’t be the interest rates or monthly payments. For many, with conventional lenders now demanding 10 or 20 percent down, it’s all about down payments.

In theory, it’s possible to avoid PMI with a piggyback mortgage structure – by borrowing 80 percent of the property value in one loan and 10 percent on a second for example. (This trick was common in the loose-lending days of old but today (in 2009), it’s much harder to find second-position lenders at loan-to-value ratios like these.

Two other brands of government-guaranteed loans are offered by federal agencies. The Department of Veterans Affairs will insure zero-down, 100 percent financing as a benefit to military veterans (even if they served in peacetime). The interest rates are similar to FHA loans.

Zero-down financing is also backed by the U.S. Department of Agriculture under its Rural Development program. The audience for RD loans is limited. They’re intended to help low-income people buy, build or renovate homes in rural areas. Houses must be modest in size, design and cost, according to the agency. The interest rates are similar to FHA and VA loans, combined with 100 percent financing. Great terms for the needs of many people if they qualify.

Pending home sales edged down with near-term sales expected to be notably lower in contrast to the spring surge when buyers rushed to take advantage of the home buyer tax credit, according to the National Association of Realtors®.

The Pending Homes Sales index,* a forward-looking indicator, declined 2.6 percent to 75.7 based on contracts signed in June from an upwardly revised level of 77.7 in May, and is 18.6 percent below June 2009 when it was 93.0. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

NAR chief economist, said lower home sales are expected in the short term. “There could be a couple of additional months of slow home-sales activity before picking up later in the year, provided the job market continues to improve,” he said. “Over the short term, inventory will look high relative to home sales. However, since home prices have come down to fundamentally justifiable levels, there isn’t likely to be any meaningful change to national home values. Some local markets continue to show strengthening prices.”

*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

If a home is being sold for below what the current seller owes on the property—and the seller does not have other funds to make up the difference at closing—the sale is considered a short sale. Many more home owners are finding themselves in this situation due to a number of factors, including job losses, aggressive borrowing against their home in the days of easy credit, and declining home values in a slower real estate market.

A short sale is different from a foreclosure, which is when the seller’s lender has taken title of the home and is selling it directly. Homeowners often try to accomplish a short sale in order to avoid foreclosure. But a short sale holds many potential pitfalls for buyers. Know the risks before you pursue a short-sale purchase.

You’re a good candidate for a short-sale purchase if:

·          You’re very patient. Even after you come to agreement with the seller to buy a short-sale property, the seller’s lender (or lenders, if there is more than one mortgage) has to approve the sale before you can close. When there is only one mortgage, short-sale experts say lender approval typically takes about two months. If there is more than one mortgage with different lenders, it can take four months or longer for the lenders to approve the sale.

·          Your financing is in order. Lenders like cash offers. But even if you can’t pay all cash for a short-sale property, it’s important to show you are well qualified and your financing is set. If you’re preapproved, have a large down payment, and can close at any time, your offer will be viewed more favorably than that of a buyer whose financing is less secure.

·          You don’t have any contingencies. If you have a home to sell before you can close on the purchase of the short-sale property—or you need to be in your new home by a certain time—a short sale may not be for you. Lenders like no-contingency offers and flexible closing terms.

If you’re serious about purchasing a short-sale property, it’s important for you to have expert assistance. Here are some people you want to work with:

·          Experienced real estate attorney. Only about two out of five short sales are approved by lenders. But a good real estate attorney who’s knowledgeable about the short-sale process will increase your chances getting an approved contract. Also, if you want any provisions or very specialized language written into the purchase contract, a real estate attorney is essential throughout the negotiation.

·          A qualified real estate professional.* You may have a close friend or relative in real estate, but if that person doesn’t know anything about short sales, working with him or her may hurt your chances of a successful closing. Interview a few practitioners and ask them how many buyers they’ve represented in a short sale and, of those, how many have successfully closed. A qualified real estate professional will be able to show you short-sale homes, help negotiate the purchase when you find the property you want to buy, and smooth communications with the lender. (All MLSs permit, and some now require, special notations to indicate that a listing is a short sale. There also are certain phrases you can watch for, such as “lender approval required.”)

·          Title officer. It’s a good idea to have a title officer do an initial title search on a short-sale property to see all the liens attached to the property. If there are multiple lien holders (e.g., second or third mortgage or lines of credit, real estate tax lien, mechanic’s lien, homeowners association lien, etc.), it’s much tougher to get that short sale contract to the closing table. Any of the lien holders could put a kink in the process even after you’ve waited for months for lender approval. If you don’t know a title officer, your real estate attorney or real estate professional should be able to recommend a few.

Some of the other risks faced by buyers of short-sale properties include:

·          Potential for rejection. Lenders want to minimize their losses as much as possible. If you make an offer tremendously lower than the fair market value of the home, chances are that your offer will be rejected and you’ll have wasted months. Or the lender could make a counteroffer, which will lengthen the process.

·          Bad terms. Even when a lender approves a short sale, it could require that the sellers sign a promissory note to repay the deficient amount of the loan, which may not be acceptable to some financially desperate sellers. In that case, the sellers may refuse to go through with the short sale. Lenders also can change any of the terms of the contract that you’ve already negotiated, which may not be agreeable to you.

·          No repairs or repair credits. You will most likely be asked to take the property “as is.” Lenders are already taking a loss on the property and may not agree to requests for repair credits.

The risks of a short sale are considerable. But if you have the time, patience, and iron will to see it through, a short sale can be a win-win for you and the sellers.

*David Bartley is a qualified Real Estate Broker and can help you with others that are Professionals in their fields.  You can email dave@BartleyRealty.com if you have any questions.

Just in…..

A State Agency designed to help people own and keep homes will hand out almost $33 million in federal money to cover mortgages for the “hardest hit” homeowners in Collier, Lee and Charlotte Counties; those who already own a home and find themselves significantly behind on mortage payments while either unemployed or underemployed. 

The lenders will actually get the money from the U.S .taxpayers.  The homeowners, in turn will get to stay out of foreclosure court and keep their homes for as long as 18 months of mortgage payments, nine of these covered courtesy of the government and nine courtesy of the banks which have to agree to forgive those payments for the plan to work.  During that time, homeowners will be obligated to find jobs that can support both their families and their mortgages in the future. 

The money, part of the “Hardest Hit Fund” could begin to arrive in Lee County as early as August; that is because Lee was picked last week as the right place to pioneer the new government program; the first of Florida’s 67 counties and possibly the first in the nation to benefit.

Those who qualify in Collier and Charlotte will likely begin recieving the mortgage aid a couple fo months later mid to late fall. Other Florida counties will get their shares at the same time, splitting about $317 million coming to the Sunshine State as “Hardest Hit” money.

A complete list of agencies, count by count is not yet available, but the Home Ownership Resource Center in Lee,  and the Collier County Housing Development Corporation in Collier County.   Everyone can apply for this program but it will be a screening process and you will need such things as your tax information from the past 3 years, unemployment statements and banking statements.  Many pople that work for themselves or are contractors out of work can benefit from this program.  Eddie Felton, the Executive Director of the Lee agency doesn’t want to see people wait, but to come in now to see what they can do to help.