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HUD On The Hotseat

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Services for Real Estate Pros with Global Fortune Solutions, LLC

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HUD on the hotseat

The US Department of Housing and Urban Development (HUD) finalized new regulations earlier in April that increase the net worth requirements of FHA-approved lenders and make these businesses liable for the oversight of mortgage brokers. Previously, since 1993, FHA had required approved lenders to hold a net worth of at least $250,000. Effective immediately, all new lender applicants must hold at least $1 million. According to the law firm K&L Gates, the new restrictions will “wreak havoc” on small business trying to provide Federal Housing Administration (FHA) loans. The new regulations would also remove approval from new loan correspondents, representatives who negotiate or service a loan, beginning May 20, 2010.

Current loan correspondents will maintain approval through December 31, 2010. Loan correspondents that do no seek FHA approval can continue to originate FHA-insured loans as third-party originators (TPOs) if they are sponsored by and work with an approved lender, according to K&L Gates. The law firm said the final regulation ignores the significant costs FHA participants will incur to meet the minimum net worth requirements. “The changes HUD is implementing in the final regulation will have an enormous impact on the delivery of FHA-insured loans to the public,” according to K&L Gates. “As we said when HUD first proposed the changes last November, fasten your seatbelts. It is going to be a bumpy ride.”

Purchase Applications Increase, Refinance Applications Decline

The Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending April 23, 2010, decreased 2.9% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1.9% compared with the previous week. The Refinance Index decreased 8.8% from the previous week, while the seasonally adjusted Purchase Index increased 7.4% from one week earlier and reached its highest level since October 2009. The increase in the purchase index was driven largely by the government purchase index, which increased 11.9% from last week on a seasonally adjusted basis, while the conventional purchase index increased 3.5% from last week.

The unadjusted Purchase Index increased 8.5% compared with the previous week and was 2.4% higher than the same week one year ago. “Purchase activity continues to increase as we approach the end of the homebuyer tax credit program,” said Michael Fratantoni, MBA's Vice President of Research and Economics. “Purchase applications were up almost 9% from a month ago, with a disproportionate share of the increase due to government purchase applications. Government applications for purchasing a home accounted for almost 49% of all purchase applications last week.” The four week moving average for the seasonally adjusted Market Index is down 3.1%. The four week moving average is up 1.6% for the seasonally adjusted Purchase Index, while this average is down 5.8% for the Refinance Index. The refinance share of mortgage activity decreased to 55.7% of total applications from 60.0% the previous week. The refinance share is at its lowest since August 2009. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 6.0% of total applications from the previous week.

Greek crisis deepens and spreads

Concerns about Greece have been plaguing international markets for months. Investors are worried that if Greece defaults on its loans, the repercussions could have a ripple effect on other countries and kill the chances for a global recovery. The yield on 10-year Greek bonds surged to 11.24% early today from 9.68% yesterday -- the highest for the 10-year since the introduction of the euro in 2002. The jump in the yield on the Greek bond has led to an enormous spread of 8.22%age points compared with German bond yields. The yield on the German 10-year bond, considered the European benchmark, slipped to 3.02% early Wednesday. The European Union has pledged nearly $40 billion at a 5% rate to Greece to help the Greek government redeem bonds that mature on May 19.

The chief catalyst behind the market turmoil came from yesterday's decision by S&P to slash the Greek bond rating to "BB+" with a negative outlook, knocking it down to junk status. This was its second rating cut in as many weeks. S&P cut its rating on Portugal by two notches to "A-," raising worries that the crisis would spread to the so-called PIIGS. In addition to Greece, they include Portugal, Ireland, Italy and Spain.

Stocks plummet

The Dow Jones industrial average tumbled 213 points yesterday, or 1.9%, closing below 11,000, a key psychological level. The Dow had ended the previous session at its highest point in 19 months. The slide was the Dow's biggest one-day point drop since July 15, 2009, when it lost 257 points. The S&P 500 index fell 28 points, or 2.3%, closing below 1,200, a psychological level traders look at. The Nasdaq composite slid 51 points, or 2%. Stocks were flat to lower in the morning as Goldman Sachs sought to defend itself on Capitol Hill against allegations it profited from the housing market collapse.

But news that ratings agency Standard & Poor's had cut Greece and Portugal's debt ratings overshadowed everything else, giving investors a reason to retreat on the back of an 8-week advance. "We're seeing the fear factor kick in about Greece and Portugal," said Peter Cardillo, chief market economist at Avalon Partners. "That's rattling the market." He said that fear was also reflected in the so-called flight to quality as investors poured money into bonds and the euro fell to a new low for the year. That was reflected by a jump in the CBOE Volatility index, Wall Street's so-called "fear gauge." It spiked 24%, hitting the highest point since February. Typically a surge in the VIX corresponds with a selloff in stocks.

DSNews.com - Home ownership falls to lowest level in 10 years

According to a report released Monday by the U.S. Census Bureau, the national homeownership rate fell to its lowest level since the first quarter of 2000 in the first quarter of 2010. The seasonally-adjusted homeownership rate of 67.2% in the first quarter of this year was 0.2% lower than the first quarter of 2009 and 0.1% below last quarter’s rate. The last time the homeownership rate was this low was exactly 10 years ago in the first quarter of 2000 when the rate was at 67.1%. Homeownership rates varied from region to region in the first quarter, with the highest rate in the Midwest, at 70.9%. The South wasn’t far behind with a rate of 69.2%, but the Northeast came in noticeably lower with a rate of 64.4%. Levels were the lowest in the West, where the homeownership rate was 61.9%. Also included in the Census Bureau’s report was data on national vacancy rates.

In the first quarter of 2010, the vacancy rate for homeowner housing was at 2.6%, coming in 0.1% lower than both the first quarter 2009 rate and the rate last quarter. The lowest regional homeowner vacancy rate in the first quarter of this year was in the Northeast, at 1.8%. Rates in all other regions were not statistically different from each other, ranging from 2.6% to 2.8%. While the vacany rate for homeonwer housing was fairly low, it was a different story for rental housing. The national vacancy rate for rental housing was 10.6%, 0.5% greater than the first quarter of 2009 but 0.1% lower than last quarter’s rate. Regionally, the rental vacancy rate was the highest in the South, at 13.2%, and it was lowest in the Northeast, at 7.5%. The Midwest and West filled in the gap between these extremes, at 11% and 9%, respectively. Taking into account both homeowner and rental vacancy rates, approximately 14.5% of housing units were vacant in the first quarter of 2010. Year-round vacant units comprised 11% of total housing units, while 3.5% were for seasonal use. Approximately 3.4% of the units were for rent, 1.5% were for sale only, and 0.6% were rented or sold but not yet occupied.

Above Post Written by: Chris Mclaughlin with Short Sale Riches.com

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