NAR Pushes Bill for Quicker Response on Short Sales

NAR pushes bill for quicker response on Short Sales

Inside a professional Realtor's mind on Short Sales...

Short sales have been on the rise in the real estate marketplace over the last couple of years. The biggest problem that we Realtors have faced is that the banks have not been prepared to handle these transactions efficiently. Now, when I say "we Realtors", understand that "we Realtors" are in the business of serving buyers and sellers. Without consistency and standards, it is nearly impossible to assist our clients in the expert manner that they deserve. Though most clients understand that certain things are beyond our professional control, we are continuously striving to better our industry and so our ability to serve our clients (whether they know it or not).

There have been many improvements to the Short Sale process as of late, but the biggest problem still remains... response time.

Why is that a problem?

Well, when a seller is in a position to NEED to sell, time is not exactly on their side. More often than not, sellers who seek a Short Sale are doing so in an effort to avoid a forclosure. What ends up happening is that the banks take too long to approve each aspect of the transaction. The main example being the offer to purchase. It is not unusual for lenders to recieve an offer to purchase and not respond to it for 6 months or longer. As you can imagine, this results in the frustration of both buyers and sellers. Many buyers walk away simply over the lack of any kind of timely response.

NAR (The National Association of Realtors) represents over 1.1 million members and is by far the loudest "voice of real estate". It's members, myself included, can tell you how important it becomes to sellers that they be able to sell their properties in these already stresfull situations. Homeowners may now find that relief could be on its' way thanks to the efforts of our National Association. The legislation, H.R. 6133, “Prompt Decision for Qualification of Short Sale Act of 2010,” was offered yesterday in Congress by U.S. Reps. Robert Andrews (D-N.J.) and Tom Rooney (R-Fla.). The bill would require lenders to respond to consumer short sale requests within 45 days... something Realtors have been advocating for their clients for quite some time.

I'll let you know how it turns out...

Natalie Flaming
Realtor - Broker Associate
The VIP Team
Metro First Realty
Direct: 405.412.5452
www.TheVIPofOKC.com

HUD Proposes to Reduce Seller Concessions

HUD is proposing to lower the seller concessions to an FHA buyer from 6% to 3%. This will adversely affect buyers and an already struggling Real Estate housing recovery effort.

What is a seller concession? On an FHA loan of say $150,000 a buyer can request that a seller pay up to 6% of their allowable closing costs, which equates to $9,000. Now, of course, a seller is not required to pay 6% of a buyers closing costs but it is a negotiable part of the contract that often times determines if a buyer will in fact be able to afford all of the upfront costs. To reduce this to 3% means a buyer may request only up to $4,500. On the larger loans, this may be enough to cover all of the closing costs a buyer has. Where it will affect consumers most are the smaller sales prices. For example, on an $80,000 sales price, 3% would be $2,400, which will not be enough to cover everything.

The "typical" first time home buyer will now have to come up with not only the 3.5% down payment that FHA now requires (this was recently increased by HUD from 3% to 3.5% in an effort to strengthen the FHA loans), which on the same $150,000 sales price would be $5,250, but now will have to have the additional that would not be covered. A lot of times a thousand dollars is the difference between a buyer being able to buy a home and a seller being able to sell. The closing costs being paid do not even affect the terms of the loan. If the home value is there to make the concession, should the buyer be allowed to negotiate for it and should the seller be able to make the choice to concede to it?

The following is HUD's proposal in full.


HUD No. 10-150
Lemar Wooley
(202) 708-0685 FOR RELEASE
Thursday
July 15, 2010
HUD SEEKS PUBLIC COMMENT ON THREE INITIATIVES TO BOOST FHA CAPITAL RESERVES
New measures will help FHA control risk, continue supporting housing recovery
WASHINGTON – Federal Housing Administration (FHA) Commissioner David Stevens today unveiled three specific policy changes to strengthen the FHA’s capital reserves while enabling the agency to continue to fulfill its mission to provide access to homeownership for underserved communities. The U.S. Department of Housing and Urban Development today published a Notice, seeking public comment on three specific measures to reduce financial risk and preserve affordable mortgage financing for responsible consumers.

In addition to earlier steps taken to manage its risks and to boost reserves, FHA is proposing to update the combination of credit and down payment requirements for new borrowers; reduce seller concessions from six to three percent; and tighten underwriting standards for manually underwritten mortgage loans.

“These are the latest in a series of changes to allow the FHA to manage its risk better while continuing to support the nation’s housing recovery,” said Stevens. “By protecting FHA’s capital reserves, we can continue providing affordable, responsible mortgage products and will remain the nation’s largest source of home purchase financing for underserved communities.”

For the next 30 days, HUD is seeking public comment on the following policy changes, each of which are designed to mitigate risk to the Mutual Mortgage Insurance Fund while promoting sustainable homeownership for FHA borrowers:

1. Update the combination of credit and down payment requirements for new borrowers. New borrowers seeking FHA-insured financing will be required to have a minimum FICO score of 580 to qualify for FHA’s flagship 3.5 percent down payment program. New borrowers with credit scores of less than a 580 will be required to make a cash investment of at least 10 percent. Borrowers with credit scores of less than 500 will no longer qualify for an FHA-insured mortgage.
2. Reduce allowable seller concessions from six to three percent. Allowing sellers to contribute up to six percent of the home’s sales price to offset a buyer’s costs exposes the FHA to excess risk by potentially driving up the cost of the home beyond its appraised value. Reducing seller concessions to three percent will bring FHA into conformity with industry standards.
3. Tighten underwriting standards for manually underwritten loans. When using compensating factors in the underwriting process, lenders will be required to consider those factors which are the best predictive indicators of loan performance, such as the borrower’s credit history, loan-to-value (LTV) percentage, debt-to income ratio, and cash reserves.


To submit your thoughts on what reducing seller concessions will do to a housing industry that doesn’t seem to have enough buyers go to: HUD Seller Concession Feedback

(If the link above does not open properly, copy and paste this address into your browser: http://www.regulations.gov/search/Regs/home.html#documentDetail?R=0900006480b1a605)

You can also call your elected “representatives” to let them know how parts of this proposed rule will have a negative impact for the consumer and small business.

If you have any questions about this or any other Real Estate matter, feel free to call or email me.


Natalie Flaming
Realtor - Broker Associate
Metro First Realty
Direct: 405.412.5452
Natalie@TheVIPofOKC.com
www.TheVIPofOKC.com