Has the housing market improved in the last four years

Dan Krell, Realtor®
DanKrell.com
© 2012

HousingIn retrospect, the beginning of the global recession in late 2007 was the end of the housing boom and may have spawned the foreclosures crisis and the financial crisis of 2008.  And although this period of time will undoubtedly become the basis of many future dissertations examining the “Great Recession;” you might ask “how much has the state of housing improved since 2008?”

If you recall, the Housing and Economic Recovery Act of 2008 (HERA) was anticipated to have wide reaching changes in the mortgage and housing industries as well as supposed to have assisted struggling home owners.  This multifaceted piece of legislation consolidated many individual bills addressing issues that were thought to either be the cause or the result of the financial crisis.  Besides raising mortgage loan limits to increase home buyer activity, the historic legislation was the beginning of changes meant to “fix” Fannie Mae and Freddie Mac, as well as “modernizing” FHA to make the mortgage process easier for home buyers and refinancing easier for struggling home owners. Additionally, this law was the origination of the Hope for Homeowners program to assist home owners facing foreclosure (www.govtrack.us/congress/bills/110/hr3221).

The Federal Housing Finance Agency (FHFA), originated from HERA, has been the “conservator” of the then sinking Fannie Mae and Freddie Mac. Since the FHFA took control, there has been conjecture as to what would become of the mortgage giants: some talked about closing their doors, while some talked about changing their role in the mortgage industry. Since FHFA became the oversight agency, Fannie Mae and Freddie Mac has strengthened their role in maintaining liquidity in the housing market by helping struggling home owners with their mortgages as well as freeing up lender capital by the continued purchases of loans (fhfa.gov)

The inception of Hope for Homeowners was the beginning of a string of government programs designed to assist home owners facing foreclosure, or assist underwater home owners refinance their mortgage.  Although there have been individual success stories, there has been criticism that these programs did not assist the expected numbers of home owners.  A January 24th CNNMoney article by Tami Luhby (money.cnn.com) reported that “…the HAMP program, which was designed to lower troubled borrowers’ mortgage rates to no more than 31% of their monthly income, ran into problems almost immediately. Many lenders lost documents, and many borrowers didn’t qualify. Three years later, it has helped a scant 910,000 homeowners — a far cry from the promised 4 million…” and “HARP, which was intended to reach 5 million borrowers, has yielded about the same results. Through October, when it was revamped and expanded, the program had assisted 962,000…” (money.cnn.com/2012/01/24/news/economy/Obama_housing/index.htm).

HousingDespite the recent slowdown in foreclosure activity, there is disagreement about the projected number of foreclosures going into 2013.  A March 29th Corelogic news release (www.corelogic.com/about-us/news/corelogic-reports-almost-65,000-completed-foreclosures-nationally-in-february.aspx) reported that there have been about 3.4 million completed foreclosures since 2008 (corelogic.com).  And although an August 9th RealtyTrac® (www.realtytrac.com/content/foreclosure-market-report/july-2012-us-foreclosure-market-report-7332) report indicated a 3% decrease from June to July and a 10% decrease from the previous year in foreclosure filings; July’s 6% year over year increase in foreclosure starts (initial foreclosure filings) was the third straight month of increases in foreclosure starts.

So, if you’re wondering if housing is better off today than it was four years ago, the answer may be a resounding “maybe;” It all depends on your situation.

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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of September 3 , 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

Don’t Panic – Housing relief is imminent

by Dan Krell © 2008
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Thumbing through an old copy of the late Douglas Adams’ very popular story “The Hitchhiker’s Guide Through the Galaxy,” I find the “Guide’s” message of “Don’t Panic” apropos for anyone concerned about the real estate market or in need of assistance. “Don’t panic,” help is on the way.

Help is imminent in the final form of HR 3221: the American Housing Rescue and Foreclosure Prevention Act. HR 3221 is comprised of a number of other bills that have been proposed over the past year (which started in July 2007), and has been passed in various forms in both the House of Representatives and the Senate. The hang-up on its passage has been differences between the House and Senate version. The Housing and Economic Recovery Act of 2008 (Banking.Senate.gov) is the latest proposed changes to HR 3221 and is to be voted on in the Senate in the coming week. The evolution of HR 3221, along with its many names and Acts, can be viewed at House.gov and GovTrack.us.

One of the most controversial issues in HR 3221 is the provision for tax credits to home buyers. Although home buyer tax credits up to $7,500 will be provided as an interest free loan over fifteen years, advocates and critics have argued over the tax credit’s virtues and shortcomings.

The newest wording of the American Housing Rescue and Foreclosure Prevention Act comes from the Senate’s Housing and Economic Recovery Act of 2008. Highlights of this new version include the improvement and regulation of the government sponsored entities (Fannie Mae and Freddie Mac), permanent modernization of FHA, and foreclosure protections.

Oversight of the government sponsored entities (GSE) will be through a new office that will be responsible for establishing capital and management standards (which will include internal controls, audits, risk management, and portfolio management); enforcing its orders through cease and desist authority, civil money penalties, as well as the authority to remove officers and directors; restricting asset growth and capital distributions for undercapitalized institutions; putting a regulated entity into receivership; and reviewing and approving new product offerings.

Improvements within GSEs will include the permanent loan limit increases in high cost areas and required affordable housing goals. To assist in meeting those goals a Housing Trust Fund and a Capital Magnet Fund will be created, which will used for the construction of affordable rental housing.

Modernization of FHA will allow for broader access and a streamlined process to provide mortgages to home buyers in all areas. Additionally, FHA loan limits will be raised to 110% of area median home prices (with a cap of 150% of the GSE limit).

It is anticipated that FHA will also assist home owners who are in foreclosure. Originally known as the FHA Housing Stabilization and Homeownership Retention Act (H.R. 5830), (AKA HOPE for Homeowners Act of 2008), the program will provide refinancing assistance to those homeowners who are in foreclosure. If the home owner’s lender agrees to participate, the program will provide a new loan that is the lowest of either 90% of the home value or what the borrower can afford to repay.

Given all the necessary modifications and changes to the legislation, help is hopefully near. But just in case you are in doubt, remember not to panic.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of July 7, 2008. Copyright © 2008 Dan Krell.