Real Estate Colombia

Federal Reserve Board Governor Elizabeth Duke called for lending reform to improve the U.S. housing market at an expo attended by members of the National Association of Realtors. Duke said the market was improving, but that tough lending restrictions were hampering a speedier recovery and should be loosened. Many prospective buyers may be waiting for prices to fall further or hesitate due to concerns over job stability, but Duke said many more are capable of buying a home and keeping up with payments, but don’t have the perfect credit now sought after by banks and lenders to make what used to be considered safe home loans. For more on this continue reading the following article from TheStreet.

A Federal Reserve Governor says the U.S. housing market is mending, but would do a lot better if much-needed reforms were enacted, chief among them loosening lending standards by banks and mortgage lenders.

Until that happens, expect a weak housing recovery.

Elizabeth Duke, a Federal Reserve Board Governor, spoke to a group of realtors at the National Association of Realtors Midyear Legislative Meetings Trade Expo in Washington, D.C. on May 15.

In her speech, Duke warned the real estate industry that a sustainable housing recovery depended on action from Congress and federal regulators to stabilize the U.S. mortgage market — no sure thing, given the “hard decisions” that had to be made but are often ignored by politicians.

“It is hard to reckon of a single prescription that by itself will generate a sustainable recovery in housing,” Duke said. “At the same time, I do see policies that I believe will help reduce the shadow inventory of houses in the foreclosure pipeline. I also see policy actions that could be taken to improve credit availability for potential homebuyers and, in turn, demand for houses.”

Duke notes demand is weak for home buys, as consumers either sit on the sidelines waiting for prices to fall further, or won’t pull the trigger because of fears they may lose their job and won’t be able to make their home payments. But a larger reason may be that otherwise credit-worthy consumers can’t get a loan to buy a home.

“Unfortunately, some buyers who want to buy a home are unable to do so because they are unable to obtain a mortgage,” she says. “According to the Federal Reserve’s quarterly Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS), underwriting standards for residential mortgages tightened steadily from 2007 to 2009, and they do not appear to have eased much since then.”

Duke adds that the median credit score for qualified home borrowers rose from 700 in 2006 to 760 in 2009, just as the U.S. was gripped by a major recession. But that 760 figure pretty much has not budged three years later, as banks just aren’t willing to loan money to consumers unless they have picture-perfect credit.

She’s not blaming mortgage lenders, but Duke does say that conditions are getting better, and that banks and lenders may need a push to amp up credit for homebuyers.

“Borrowers are more likely to default when they lose their jobs or when their houses decline in value,” she clarifies. “So as long as unemployment remains elevated and further house price declines remain possible, lenders will be cautious in setting their requirements for credit, and rightfully so. But these factors should ease as the economic recovery gains steam and the trajectory for house prices appears more certain.”

Banks and lenders can increase efforts to provide loan modifications, green light small sales, and speed up foreclosures — each of which would help the housing market. But it’s policy makers in Washington that can really spur upward growth in the housing market, Duke says.

“Perhaps the most vital solution that I am suggesting today is that policymakers go forward with the hard decisions that will affect the future of the mortgage market,” she told her audience. “To be sure, vital issues need to be addressed and hard questions remain to be answered. Until these tough decisions are made, uncertainties will continue to hinder access to credit, the evolution of the mortgage finance system and the ultimate recovery in the housing market. I don’t want to diminish the importance of any individual policy choice, but I do believe that the most vital prescription for the housing market is for these decisions to be made and the path for the future of housing finance to be set. It’s time to start choosing that path.”

So call it a Catch-22 — the housing market can’t really take off until the economy improves, but it’s up to both the private mortgage industry and public policy makers in Washington to adopt measures to speed that recovery along.

The question is — who wants to go first? Until consumers get a excellent answer to that question, don’t expect much growth in the U.S. housing market.

This article was republished with permission from TheStreet.

Article source: http://www.nuwireinvestor.com/articles/fed-governor-calls-for-lending-reform-59243.aspx

Last June, reporters Charles Piller and Robert Lewis wrote this tale about “hard-money” lending abuses in Nevada County.  One might expect that they were writing about high interest rates and harsh loan terms.  It turns out that the victims in the tale were not borrowers, but people who loaned money to hard-money lenders to fund the hard money loans:

Some of those investors entrusted their entire life savings to brokers who used the money to make high-interest loans to people who either didn’t qualify for a traditional bank loan or who needed money quick.

In reaction, the Senate Committee on Business Professions and Economic Development and the Senate Committee on Banking Financial Institutions held a joint oversight hearing on hard-money lending in January. Thereafter, the co-chairs of those committees co-authored a bill, SB 978, intended to address these problems. Unfortunately, SB 978 as amended to date imposes significant legal burdens not only on most borrowers but also the entire real estate industry.  In effect, the bill requires the building of a haystack of new filings to find some needles of information about hard-money lenders.

First, the bill would amend Section 25102(e) to require a notice-filing for the offer or sale of evidences of indebtedness.  This change alone would impact a huge number of borrowers. Section 25019 defines “security” to include any evidence of indebtedness.  Currently, borrowers can rely on Section 25102(e) as a self-executing exemption from the qualification provisions of Section 25110 provided the offer and sale does not involve a public offering.  Although SB 978 wouldn’t condition the availability of the exemption on filing a notice, issuers would be required to do so.  This means that if the bill is enacted in its current form, the Department will be inundated with filings, the vast majority of which will not be made by hard-money lenders.

Second, SB 978 would impose additional informational, recordkeeping and suitability requirements on virtually any real estate related issuer.  The bill would add a new Section 25102.2 to require any issuer that relies upon an exemption from Section 25110 with respect to the offer or sale of securities, other than an exemption provided by Section 25102.5, and that is principally engaged in the business of purchasing, selling, financing, or brokering real estate, to provide additional information regarding the nature of the proposed offering on a form prescribed by the Commissioner. These issuers would also be required to make reasonable efforts to ensure all of the following:

• All persons to whom securities are sold can be reasonably assumed to have the capacity to know the fundamental aspects of the investment, by reason of their educational, business, or financial experience.
• All persons to whom securities are sold can bear the economic risk of the investment.
• The investment in the security is suitable and appropriate for each purchaser, given the purchaser’s investment objectives, portfolio structure, and financial situation.

Article source: http://www.nuwireinvestor.com/articles/hard-money-lending-law-misses-target-59226.aspx

Signs of a right recovery are finally emerging in the U.S. property market as average prices for homes across the nation inch up for the third month in a row when excluding the sales of distressed properties. The CoreLogic House Price Index indicates a year-on-year increase as well when factoring out distressed properties. The upward shift is marginal, but homes in competitive markets have seen a noticeable increase. Excluding distressed home sales, the states experiencing the largest increases in value include Idaho (5.4%), North Dakota (5.1%) and South Carolina (4.7%). For more on this continue reading the following article from Property Wire.

National home prices in the United States, including distressed sales, declined on a year on year basis by just 0.6% in March compared to the same period in 2011, according to the latest date from CoreLogic.

On a month to month basis prices increased by 0.6% compared to February, the first monthly increase since July 2011. Both figures indicate the market is poised for a recovery, experts believe.

Excluding distressed sales, month on month prices increased for the third month in a row. The CoreLogic House Price Index also shows that year on year prices, excluding distressed sales, rose by 0.9% in March 2012 compared to March 2011. Distressed sales include small sales and real estate owned (REO) transactions.
   
‘This spring the housing market is responding to an improving balance between real estate supply and demand which is causing stabilization in house prices,’ said Mark Fleming, chief economist for CoreLogic.

‘Although this has been the case in each of the last two years, the difference this year is that stabilisation is occurring without the support of tax credits and in spite of a declining share of REO sales,’ he clarified.

While housing prices remain flat nationally, in many markets tighter inventories are beginning to lift home prices, according to Anand Nallathambi, president and chief executive officer of CoreLogic.

‘This is right in Phoenix, New York and Washington, for example, which all reflect higher home price values than a year ago. A continuation of this trend will be excellent for our industry across the US markets,’ Nallathambi added.

Including distressed sales, the five states with the highest increase were Wyoming up 5.9%, West Virginia up 5.3%, Arizona up 5.1%, North Dakota up 4.7% and Florida up 4.5%.

Including distressed sales, the five states with the greatest depreciation were Delaware down 10.6%, Illinois down 8.3%, Alabama down 8%, Georgia down 7.3% and Nevada down 5.8%.

Excluding distressed sales, the five states with the highest appreciation were Idaho up 5.4%, North Dakota up 5.1%, South Carolina up 4.7%, Montana up 3.5% and Kansas up 3.4%.

Excluding distressed sales, the five states with the greatest depreciation were Delaware down 7.6%, Alabama down 4.1%, Nevada and Vermont both down 3.9% and Rhode Island down 2.9%.

This article was republished with permission from Property Wire.

Article source: http://www.nuwireinvestor.com/articles/us-real-estate-rebounds-59202.aspx