From the Desk of Bob Caldwell

Real Estate News (Week of 5/5/13-5/11/13)

     Most times when a loan officer writes a low down payment home loan, they get the same question from the client. “How can I get the mortgage insurance dropped?” The simple answer—reach 20 or 22 percent equity—will soon become complex. Starting June 3, the Federal Housing Administration will require most borrowers using its loan products to keep the insurance for the life of the loan or, in cases with a 10 percent down payment, at least 11 years. The FHAʼ’s new mortgage insurance cancellation policy is aimed at shoring up the agencyʼ’s reserves. The FHA insures its own loans, and the fund registered a $13.48 billion shortfall last November, due largely to loan defaults tied to the recession and housing bust. Altering the cancellation policy and increasing the upfront insurance fees — a move already implemented — will generate billions in revenue. First-time homebuyers will be those most impacted by the FHA changes. FHA loans are easier to qualify for than most other home loan products. Underwriting standards, such as credit scores, debt-to-income ratio and down payment and closing cost assistance, are less strict, and the down payment can be as low as 3.5 percent of the purchase price. “FHA loans are vital to the housing market because they allow first-time buyers to get into the market,”Savannah Area Board of Realtors President Donna Davis said. The FHA backed 15 percent of new loans issued in the Savannah area in 2011 and 2012 and 13 percent of home loans closed in the first quarter of 2013. Realtors estimate 90 percent of those 1,500-plus loans went to first-time buyers. The heavy percentage of first-time buyers in the FHAʼ’s portfolio should minimize the effects of the cancellation change, many housing industry insiders say. Statistics show first-time buyers sell their starter homes within five to seven years, on average, often before they reach the current 22-percent equity threshold that allows them to drop the insurance. FHA officials are encouraging borrowers to apply for FHA loans by May 24 to meet the deadline. Source: Savannah Morning News Note: If you are considering purchasing or refinancing, now is the time to move forward if you presently have or will need an FHA loan. Please contact me ASAP to determine if there are alternatives or you must move quickly.

     Data through February 2013, released by S&P Dow Jones Indices for its S&P/Case-ShillerHome Price Indices, the leading measure of U.S. home prices, showed average home prices increased 8.6 percent and 9.3 percent for the 10- and 20-City Composites in the 12 months ending in February 2013. The 10- and 20-City Composites rose 0.4 percent and 0.3 percent from January to February. All 20 cities covered by the indices posted year-over-year increases for at least two consecutive months. In 16 of the 20 cities annual growth rates rose from the last month; Detroit, Miami, Minneapolis and Phoenix saw slight annual deceleration ranging from -0.1 to -0.4 percentage points. Phoenix continued to stand out with an impressive year-over-year return of +23.0 percent while Atlanta and Dallas had the highest annual growth rates in the history of these indices since 1992 and 2001, respectively. “Home prices continue to show solid increases across all 20 cities,” said David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “The 10- and 20-City Composites recorded their highest annual growth rates since May 2006; seasonally adjusted monthly data show all 20 cities saw higher prices for two months in a row—the last time that happened was in early 2005." Source: NMP Daily

     Homeowner's insurance rates have risen 69 percent over the pastdecade, now averaging $1,000 a year. But as rates rise, home owners are finding their coverage hasnʼ’t. In fact, some insurance companies have added new restrictions or increased deductibles. Some home owners are being faced with tens of thousands of dollars in costs for damages that they originally thought would be covered by their homeowner's insurance policies. "It's easy to think you're covered when you're not," says Amy Bach, executive director of advocacy group United Policyholders. For example, coverage most often falls short in covering flood damage and wind damage, according to the article. Private insurers mostly stopped covering flood damage, which forced home owners to be proactive in purchasing coverage through the National Flood Insurance Plan. Also, special wind deductibles have been introduced in several states, but home owners need to be proactive in checking their amount of coverage in case of a windstorm and deciding whether they need additional coverage. Another area where homeowner's insurance policies fall short in coverage, according to experts, is covering water damage, such as from a cracked pipe, leaky toilet, or clogged drain. Many insurers have scaled back their coverage in this area. Some experts recommend home owners should increase their protection by getting a rider that covers sewer and drain backups, particularly if they have a sump pump. Wireless water alarms -- which cost about $25 for three -- also can help home owners detect a leak quickly before significant damage. Source: CNNMoney

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