Seattle Shoreline Edmonds Real Estate Information Blog

One of the many FHA provisions to H.R. 3221, the Housing and Economic Recovery Act of 2008 bill is the prohibition of Seller Funded Down Payment Assistance.  This means that FHA will not recognize and/or accept seller donations for the purpose of down payments. 

SEC. 2113. CASH INVESTMENT REQUIREMENT AND PROHIBITION OF SELLER-FUNDED DOWN PAYMENT ASSISTANCE.

 Paragraph (9) of section 203(b) of the National Housing Act (12 U.S.C. 1709(b)(9)) is amended to read as follows:

 (9) CASH INVESTMENT REQUIREMENT-

 `(A) IN GENERAL- A mortgage insured under this section shall be executed by a mortgagor who shall have paid, in cash or its equivalent, on account of the property an amount equal to not less than 3.5 percent of the appraised value of the property or such larger amount as the Secretary may determine.

`(B) FAMILY MEMBERS- For purposes of this paragraph, the Secretary shall consider as cash or its equivalent any amounts borrowed from a family member (as such term is defined in section 201), subject only to the requirements that, in any case in which the repayment of such borrowed amounts is secured by a lien against the property, that--

`(i) such lien shall be subordinate to the mortgage; and

`(ii) the sum of the principal obligation of the mortgage and the obligation secured by such lien may not exceed 100 percent of the appraised value of the property plus any initial service charges, appraisal, inspection, and other fees in connection with the mortgage.

 `(C) PROHIBITED SOURCES- In no case shall the funds required by subparagraph (A) consist, in whole or in part, of funds provided by any of the following parties before, during, or after closing of the property sale:

 `(i) The seller or any other person or entity that financially benefits from the transaction.

 `(ii) Any third party or entity that is reimbursed, directly or indirectly, by any of the parties described in clause (i).

 This subparagraph shall apply only to mortgages for which the mortgagee has issued credit approval for the borrower on or after October 1, 2008.'

On July 31, a bill (H.R.6694) was introduced that would allow FHA to continue to recognize seller-funded down-payment assistance when borrowers have a FICO score of 680 or greater. Borrowers with FICO scores of between 620 and 680 would also be able to rely on seller-funded gifts of up to 3 percent of their loan principal, but would have to pay increased mortgage insurance premiums.

For further information regarding the bills noted above visit http://thomas.loc.gov/ and enter in the Bill #H.R. 3221, for the Housing and Economic Recovery Act of 2008 or Bill #H.R.6694, the FHA Seller-Financed Downpayment Reform and Risk-Based Pricing Authorization Act of 2008 .

This information was published by the National Association of Home Builders.  You can view the full articles by visiting their official online weekly newsletter at http://www.nbnnews.com/. 

Well you've probably heard by now that last week legislation approved H.R. 3221, the Housing and Economic Recovery Act of 2008. It contains several provisions that will allow the FHA to deliver a range of mortgage products more effectively. However, the FHA's minimum downpayment has been increased from 3% to 3.5%. The bill:

• Increases the current limit for FHA-insured mortgages to enable deserving potential buyers to purchase homes in more markets across the country. “Permanently raising the FHA loan limit to 115% of an area’s median home price, up to $625,500, will enable more creditworthy borrowers to purchase an FHA-insured home in high-cost markets,” said Dunn.
  
  
• Also increases the floor for area FHA limits from $200,160 to $271,050.
  
  
• Enables the FHA to simplify requirements for condominium loans, which have often been burdensome and have differed significantly from the rules applied to mortgage loans for detached single-family homes. 
  
  
• Expands opportunities for seniors to tap into equity in their home through FHA reverse mortgage loans. The bill creates a higher, nationwide uniform loan limit equal to $625,500, reduces and caps the maximum fee lenders can charge seniors for FHA reverse mortgage loans and establishes protections to prohibit requiring seniors to purchase other financial products in conjunction with these loans. This will help more seniors who are at least 62 years old access the equity in their homes without having to make mortgage payments until they move out.
  
  
• Permits the FHA to extend the maximum loan maturity to 40 years to enable borrowers to reduce their monthly mortgage payments while ensuring that some part of the monthly payment is used to reduce the outstanding loan balance.
  
  
• Allows the FHA to charge higher mortgage insurance premiums, but places a one-year moratorium on implementation of risk-based mortgage insurance premiums.

June 27th, Bloomberg reports:

Homes Less Affordable as Prices Fall, Rates Rise, Zillow Says
By Sharon L. Lynch

June 27 (Bloomberg) -- Rising mortgage rates are driving up the cost of buying a house even as prices fall, making property more expensive across the U.S., according to a new study by Zillow.com, an online provider of home valuations.

Monthly payments on 30-year fixed mortgages are 6 percent to 10 percent higher in 41 of the top U.S. housing markets than they were two months ago. First-quarter prices have declined from a year earlier in 88 percent of those areas, Zillow said.

``We're going to need about a 30 percent decline in house prices if you are going to keep payments stable,'' said Morris Davis, a former senior economist with the Federal Reserve and now a real estate professor at the University of Wisconsin-Madison's School of Business.

Seven Federal Reserve benchmark cuts since September have failed to lower mortgage rates as banks have curtailed lending after taking writedowns or credit losses of more than $400 billion from investments in mortgages. Rates for 30-year fixed-rate home loans were about 6.3 percent when the Fed first reduced its target federal funds rate nine months ago. They're now just under 6.45 percent, data from Bankrate.com show.

Zillow based its calculations on almost 25,000 mortgage offers to potential homebuyers with credit ratings of at least 680 out of a possible 850. The would-be buyers sought bids through Zillow's Mortgage Marketplace, a new service that helps consumers shop for home loans. Zillow's main business provides U.S. home valuation estimates based partly on sales data.

`Unfortunate Pickle'

The average monthly mortgage payment rose $131, or $1,572 a year, since the beginning of April in the 41 areas surveyed, Zillow said. The figure is controlled for population.

``The story here is not so much how much more it will cost you over the life of the loan, but how much less house you can buy,'' said Greg Rand, managing partner of Prudential Rand Realty in Westchester County, New York. ``It's an unfortunate pickle that we're in.''

Prudential Rand has more than 700 sales associates and a mortgage brokerage that arranges financing.

Home prices in 20 U.S. metropolitan areas fell in April by the most on record, according to the S&P/Case-Shiller home price index, and new home sales declined 40 percent in May from a year ago, according to the U.S. Census Bureau. Sales of previously owned homes in the U.S. rose in May from the lowest level in at least nine years as a slide in prices lured some buyers into the market, the National Association of Realtors said yesterday.

Fed Actions

U.S. housing was less affordable in April than the previous month even as sales increased in some markets, the Realtors data show. The composite homebuyer index fell to 129.8 in April from 130.6 in March. A value of 100 means that a family with the national median income has exactly enough income to qualify for a mortgage on a median-priced home.

Fed rate reductions have historically lowered mortgage rates. From Jan. 3, 2001, to June 25, 2003, the Fed cut rates 13 times. Mortgage costs fell eight times and rose five times, according to North Palm Beach, Florida-based Bankrate.com.

Changes in mortgage rates have the biggest impact when those rates are near the historic lows they are now, Davis said. If interest rates were at 1 percent and rose to 2 percent, house prices would have to drop 50 percent to keep a buyer's house payment the same.

Mortgage payments rose the most in the California metropolitan areas of Ventura and Santa Rosa, gaining 10 percent, according to Zillow. That added $220 a month to loan payments in Ventura and $189 in Santa Rosa. Home prices in those areas fell about 20 percent in the first quarter from a year earlier, the company said.

Higher Payments

The annual cost for a 30-year fixed-rate mortgage to buyers with good credit in the Ventura area is now $2,640 more now than 60 days ago. That amounts to $79,200 more over the life of the loan, without adjusting for inflation, Zillow said.

The trend holds true in California metro areas including Sacramento, San Francisco, Los Angeles, San Jose and San Diego, where mortgage payments on median priced homes range from 7 percent to 10 percent more now than in April.

California is among the states hardest hit by the biggest drop in U.S. home sales in 26 years. One in every 183 households in the state was in some stage of foreclosure in May, more than double the national average, according to Irvine, California-based RealtyTrac Inc.

Sales Gain

Foreclosures drive down prices by contributing to the higher inventory of unsold homes, forcing prices lower and reducing home equity, said Ryan Ratcliff, an economist with the UCLA Anderson Forecast in Los Angeles.

Home sales in California rose 18 percent and exceeded an annualized, seasonally adjusted rate of 400,000 last month for the first time since early 2007, the state Realtors Association said in a news release on June 25. The increase in sales volume came because of more ``distressed sales,'' the Los Angeles-based group said.

In New York, New Jersey, Long Island and parts of Pennsylvania, where the median estimated home value is $418,500 and APRs have risen from 5.9 percent to 6.5 percent, today's buyers can expect to pay $1,656 more a year while home values for the region have dropped about 1.4 percent.

The price of condominiums and co-operative apartments in Manhattan are an exception, with the median increasing 13.2 percent to a record $945,000 in the first quarter, according to an April 2 report by New York-based real estate appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate.

Jumbo Pain

Buyers in markets including New York and coastal California, where more than half of all homes cost more than $417,000, are feeling the most pain. Jumbo loan rates have risen from about 7 percent to about 7.4 percent over the nine months the Fed has cut rates, according to Bankrate.com.

The cost for 30-year fixed-rate jumbo mortgages has increased more than 2 percentage points since June 2003, according to data from Bankrate.com. Over the past year, the average spread between jumbo and so-called conforming mortgages has been about 93 basis points, or 0.93 percentage point. That gap is now about 111 basis points.

``While it's a buyers market in terms of home prices, that is definitely being mitigated by the cost of financing,'' said Stan Humphries, Zillow's vice president for data and analytics.

To contact the reporter on this story: Sharon L. Lynch in New York at sllynch@bloomberg.net

A News Advisory was released by Mayor, Gregory Nickels announcing the dates for a public forum on the proposed municipal jail sites. You can read the release below or view the release on the Official City Site at http://www.seattle.gov/news/detail.asp?ID=8516&Dept=36

Seattle seeks feedback on possible municipal jail sites
Four dates set for public forums

SEATTLE - The city of Seattle announced today it will hold public forums around the city to provide information and hear feedback about possible sites for a new Seattle Municipal Jail. While residents are welcome to attend any of the forums, each will focus primarily on a specific potential jail site, as outlined below. The forum dates and locations are:

• Thursday, June 26, from 6 to 9 p.m. at the Aerospace Machinists Union Hall A, located at 9125 15th Place S. – focus: West Marginal Way and Myers Way sites;
• Saturday, July 12, from 9 a.m. to noon, in the Wellness Center at North Seattle Community College, located at 9600 College Way N. – focus: Aurora site;
• Saturday, July 26, from 9 a.m. to noon, in the Brockey Conference Center at South Seattle Community College, located at 6000 16th Ave. S.W. – focus: West Marginal Way and Myers Way sites;
• Wednesday, July 30, from 6 to 9 p.m. at the Seattle Center Exhibition Hall, located at 225 Mercer Street – focus: Interbay site.

Each forum will have materials available in multiple languages and interpreter services will be available upon request. Those requiring special accommodations or interpretation services should contact The Keller Group at (425) 788-8990 five working days prior to the forum they plan to attend.

To find public transportation to any of the forums, please visit the Metro King County Web site at http://www.kingcounty.gov/ and click on Trip Planner. 

In addition to the public forums, the city will conduct two meetings in August focused specifically on potential environmental impacts. Those meetings will be part of the State Environmental Policy Act (SEPA) Environmental Impact Statement process. The city will announce the dates and locations for the SEPA forums once they have been scheduled.

The forums are part of a public outreach program to identify questions and concerns regarding a new municipal jail. The city has interviewed a diverse cross-section of 50 neighborhood and community leaders about issues surrounding the siting of a jail and it manages a Web site (http://seattle.gov/municipaljail/), where Seattle residents can ask questions or send in comments. City representatives also have made less formal presentations to community and neighborhood groups who have asked for information.

Seattle is considering building a municipal jail because it will lose all of its misdemeanor jail beds when its nonrenewable contract with King County ends in four-and-a-half years. Because of space constraints in existing County facilities in downtown Seattle and Kent, King County is requiring that Seattle and the other cities end their use of the County jail for city misdemeanants by Dec. 31, 2012. The city has identified four sites that might house a low-rise jail:

• 11762 Aurora Avenue. N.
• 1600 W. Armory Way
• Highland Park Way Southwest and West Marginal Way, and
• 9501 Myers Way S.

For more information, visit the city’s municipal jail Web site: http://www.seattle.gov/municipaljail/

As reported by NAR (National Association of Realtors) on May, 7th 2008... 

A flat pattern in home sales activity should continue for the next couple months before improving over the summer, according to the latest forecast by the National Association of Realtors®.

Lawrence Yun, NAR chief economist, said the extent of an expected recovery hinges on better access to affordable loans. "Things are beginning to improve, but the availability of affordable mortgages is uneven around the country and sometimes within metropolitan areas," he said. "As anticipated, we continue to look for a soft first half of the year, for both housing and the economy, before notable improvements in the second half. Some time is needed for FHA and new conforming jumbo loans to become widely available."

The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in March, edged down 1.0 percent to 83.0 from a downwardly revised level of 83.8 in February, and was 20.1 percent lower than the March 2007 index of 103.9.

NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said additional costs in many markets are hindering a recovery. “Our members are telling us that more buyers are looking at homes but are slow in signing contracts, and that’s contributing to the weakness in pending home sales,” he said. “In many cases buyers are waiting for greater access to affordable credit, especially in higher cost areas, but some are disappointed with what appears to be unnecessarily restrictive lending requirements. The good news this week is there is some discussion toward relaxing some of the burdensome lending practices.”

The PHSI in the Northeast jumped 12.5 percent in March to 80.8 but remains 15.4 percent below a year ago. In the South, the index slipped 0.1 percent to 84.9 and is 26.7 percent lower than March 2007. The index in the West declined 1.4 percent in March to 91.2 and is 9.5 percent below a year ago. In the Midwest, the index fell 10.4 percent in March to 74.1 and is 22.3 percent below March 2007.

Existing-home sales are projected to rise from an annual pace of 4.95 million in the first quarter to 5.82 million in the fourth quarter. For all of 2008, existing-home sales are likely to total 5.39 million, and then rise 6.1 percent to 5.72 million next year. “Although more than half of local markets are expected to see price growth this year, the aggregate existing-home price will decline 2.4 percent in 2008, driven by a relatively few markets that are very oversupplied,” Yun said. The median price is forecast at $213,700 this year before rising 4.1 percent to $222,600 in 2009.

Some areas already are seeing sales increases, underscoring that all real estate is local. In March, unpublished snapshot data shows sales in Bakersfield, Calif., and Jackson, Miss., were higher than a year ago. At the same time, price gains were noted in markets such as Buffalo-Niagara Falls, and Cedar Rapids, Iowa. On May 13, NAR will report first-quarter data on metropolitan area home prices, covering about 150 metro areas, and state home sales.

"Although some market adjustments are necessary, a downward overshooting of the housing market would cause unnecessary loss in economic output, income and jobs," Yun said. "It is critical to stimulate housing demand by inducing fence sitters back into the market. A home buyer tax credit on any home purchase would accomplish that."

New-home sales are expected to fall 30.9 percent to 536,000 this year before rising 10.1 percent to 590,000 in 2009. Housing starts, including multifamily units, will probably drop 29.5 percent to 955,000 in 2008, and then rise 1.3 percent to 967,000 next year. The median new-home price is estimated to fall 3.7 percent to $238,000 this year, and then rise 5.4 percent in 2009 to $250,900.

The 30-year fixed-rate mortgage is likely to rise gradually to 6.2 percent by the end of the year, and then average 6.3 percent in 2009. NAR’s housing affordability index is expected to rise 10 percentage points to 127.0 for all of 2008.

Growth in the U.S. gross domestic product (GDP) should be 1.5 percent this year and 2.3 percent in 2009. The unemployment rate is projected to average 5.3 percent in 2008 and 5.5 percent next year.

Inflation, as measured by the Consumer Price Index, is seen at 3.4 percent this year and 2.2 percent in 2009. Inflation-adjusted disposable personal income is forecast to grow 1.2 percent in 2008 and 3.0 percent next year.

# # #

*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 from 2001 through 2004 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 April will be released May 23; the next Forecast / Pending Home Sales Index will be released June 9.

As reported by the Seattle Times and P-I; commencing December 31, 2012, King County Jail will no longer accept and house misdemeanor offenders leading City of Seattle Officials to settle on four possible locations for a new jail.  One of which is right in our backyard and we want to hear your thoughts on this topic...

Visit the official City of Seattle (Municipal Jail Planning Project) site for more information and to post a comment or pose a question:

http://www.seattle.gov/municipaljail/background.htm

Read the Seattle PI article published 5/7/2008 along with comments from Larry Smith, President of the Haller Lake Community Club;

http://seattlepi.nwsource.com/local/361984_jail07.html?source=rss

If you haven't already heard, Seattle City Light & Snohomish County PUD together with JACO Environmental are running similar programs where they are paying customers to get rid of their old refrigerators and freezers! 

Seattle City Light reports, old refrigerators or freezers can use three times as much energy as newer ones, significantly running up your electric bill and contributing to global warming.

Visit your utility company by clicking on the applicable link below:

City of Seattle:  http://www.seattle.gov/light/conserve/resident/appliances/cv5_appA2.htm

Snohomish County:  http://www.snopud.com/energy/home/econpgms/recycle.ashx?p=2543