New rules blamed for blowing Lee County real estate deals

By DICK HOGAN - news-press.com • July 9, 2009

New rules for appraising houses have some Lee County real estate agents fuming - they say inexperienced or out-of-town appraisers are blowing deals by giving lowball values that make financing impossible.
But some in the appraisal industry say that while the new rules aren't perfect, they're not a serious problem for the industry.

At issue are rules that took effect May 1 requiring that loans picked up by mortgage giants Fannie Mae and Freddie Mac need to include appraisals by appraisers that have no connection with the bank personnel approving the deals. That means that many banks have turned appraisals over to appraisal management companies that then hire the appraisers so there's no direct connection with the banks.

The rules, which are part of a pact between New York Attorney General Andrew Cuomo and Fannie Mae and Freddie Mac, are in response to widespread complaints about inflated appraisals during the real estate boom.

But agents say at least some of the appraisers are hired by management companies looking for the lowest bid. That increases the management company's cut of the appraisal fee.
Meanwhile, legislation has been introduced in Congress that would implement an 18-month moratorium on the new rules.
I think the cure is worse than the problem was," said Suzanne Sherer of Re/Max Realty Team, who's president of the Realtor Association of Greater Fort Myers and the Beach. "I think there's a huge disconnect between what happens in the decision-making up in Washington and what's happening in the streets. We've seen several deals fall apart based on the appraisal."
Bad appraisals are a frequent occurrence, said agent Ron Smiley of VIP Realty Group on Sanibel. "At our Monday sales meeting you hear some of the horror stories."

In one case in his office, he said, "They sent an appraiser in Cape Coral who just got his license out to Sanibel and the appraisal came in really low" because the appraiser wasn't familiar with the market.

"You get into the subtleties of beachfront" and issues such as direct vs. indirect beach access, Smiley said
Sherer said her office had a similar experience with an appraiser from central Florida who used a freshwater canal house as a comparable value for a Gulf-access home in the Cape.
When the agent protested, she said, "The answer was that 'It's all waterfront.'"
Appraisers take a more nuanced view, however.
While the new rules are not ideal, appraisers are not to blame for a market where prices are falling rapidly, said Bill Garber, director of governmental relations at the Appraisal Institute. He defended the industry, saying, "The appraisers only report what's going on in the market."

Matt Simmons, who appraises residential property for Fort Myers-based Maxwell & Hendry Valuation Services, said not all management companies operate strictly on the bottom line.

"There's all kinds of different shades here," he said. "The big banks go with the big-box appraisal management companies and that's where the bulk of the work goes," often to the low bid.
But, Simmons said, for one job to appraise some local properties, "We signed up today with a bank in Illinois. They've taken the time to go slowly. They took the time to pick a management company that didn't operate in the same way as the big-box ones do."

The new rules are in the right spirit, but had to be implemented because for years the federal government failed to push state regulators to crack down on unethical appraisers and lenders, he said.
"The whole reason this is being done is we wouldn't hold people responsible who were abusing the system and pressuring appraisers," Simmons said, and there won't be true reform "until you really draw down on that and focus in each state on weeding out the bad apples on both the lending and appraisal sides."
He also noted that lenders don't actually have to hire management companies - if they want to, they can erect strong rules separating their appraisal departments from the bank employees green-lighting loans.
David Hall, president of Fort Myers-based First Community Bank of Southwest Florida, said the new rules occasionally scuttle a deal but aren't a serious problem. "Usually the values (of the asking price and the appraisal) are relatively close" and something can be worked out.

When the prices are far apart, he said, it's a problem, but may simply indicate the seller wants too much for a property.
"If they've got an agreement to buy for $150,000 and the appraisal comes in at a hundred, are we doing the customer a favor letting him buy it at that price?" Hall asked. "The answer is no."

Pending Home Sales Record Fourth Straight Monthly Gain

Washington, July 01, 2009
Pending home sales show a sustained uptrend, rising for four consecutive months with very favorable housing affordability and a first-time buyer tax credit boosting activity, according to the National Association of Realtors®.

The Pending Home Sales Index,1 a forward-looking indicator based on contracts signed in May, increased 0.1 percent to 90.7 from an upwardly revised reading of 90.6 in April, and is 6.7 percent higher than May 2008 when it was 85.0. The last time there were four consecutive monthly gains was in October 2004.

Lawrence Yun, NAR chief economist, cautions that there could be delays in the number of contracts that go to closing. “Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions,” he said. “Rises in contract activity show buyers are becoming more active even as they face much more stringent loan underwriting standards. Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy.”

For more information, contact:Walt Molony 202/383-1177 wmolony@realtors.org
Pending Home Sales Record Fourth Straight Monthly Gain
Washington, July 01, 2009
Pending home sales show a sustained uptrend, rising for four consecutive months with very favorable housing affordability and a first-time buyer tax credit boosting activity, according to the National Association of Realtors®.
The Pending Home Sales Index,1 a forward-looking indicator based on contracts signed in May, increased 0.1 percent to 90.7 from an upwardly revised reading of 90.6 in April, and is 6.7 percent higher than May 2008 when it was 85.0. The last time there were four consecutive monthly gains was in October 2004.
Lawrence Yun, NAR chief economist, cautions that there could be delays in the number of contracts that go to closing. “Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions,” he said. “Rises in contract activity show buyers are becoming more active even as they face much more stringent loan underwriting standards. Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy.”
The Pending Home Sales Index in the Northeast rose 3.1 percent to 80.9 in May and is 6.8 percent above a year ago. In the Midwest the index slipped 1.3 percent to 89.2 but is 11.4 percent above May 2008. The index in the South declined 1.7 percent to 92.6 in May but is 7.9 percent higher than a year ago. In the West the index rose 2.2 percent to 96.9 and is 0.7 percent above May 2008.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said the appraisal issue is complicated. “We see that distressed homes often are selling for 20 percent less than normal homes in the same area, but some appraisals don’t distinguish between traditional homes and distressed property,” he said. “In many cases appraisers from outside the area are being used, but as everyone knows real estate is local and appraisals should be done by an expert with local expertise.”

McMillan said sellers shouldn’t hesitate to speak with an appraiser about their home. “Sellers should feel free to tell an appraiser about improvements and renovations to their home, and how it compares with other homes in the neighborhood,” he said.

“Also, if recent sales in the neighborhood were discounted, but not similar to your home in terms of quality or condition, that should be pointed out. It wouldn’t hurt to put all this in writing, especially if an appraiser is not familiar with your area. A Realtor® could offer guidance and information to help you with this process.”

NAR’s Housing Affordability Index2 remains at historic highs. The affordability index fell to 171.6 in May from an upwardly revised 178.8 in April, which was the highest on record dating back to 1970. “Under these conditions the typical family would devote only 14.6 percent of gross income to mortgage principal and interest, which is one of the lowest percentages on record,” Yun said.
The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income.

A median-income family, earning $60,800, could afford a home costing $296,700 in May with a 20 percent downpayment, assuming 25 percent of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small downpayments are roughly 80 percent of what a median-income family can afford. The affordable price was significantly higher than the median existing single-family home price in May, which was $172,900.

The first-time buyer tax credit also is benefiting the market. “Strong activity by entry level buyers is helping to absorb inventory and allow some existing owners to make a trade,” Yun said.

Existing-home sales should trend up through the end of the year, with normal local market differences. “The big question is how much the appraisal issue will impact the ability of contracts to go to closing,” Yun said. “We are currently conducting a study to assess the degree to which new appraisal rules are impacting home sales.”

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.

Tampa Bay area home sales dip in May, but prices rebound

By James Thorner, Times Staff Writer

After rallying for eight straight months, Tampa Bay home sales stumbled in May.

Single-family home sales totaled 2,243, down 1.2 percent from the 2,270 sales recorded in May 2008, according to the Florida Association of Realtors. It's also fewer than the 2,326 home closings in April.

But on the home price front, the trajectory has been positive. In May, Tampa Bay's median home sales price reached its 2009 peak. It rose to $141,100, up from $135,200 in April.

"We hit some great numbers in Hillsborough County. We moved 1,440 units and the median sales price was back up," said Deborah Farmer of StarLight Realty, past president of the Greater Tampa Association of Realtors. "I never thought I'd see the day when I could say, 'Back up.' "

May's sales crimp appeared as the government's housing stimulus lost some of its tickle. Mortgage rates rose unexpectedly in late May from their April lows. An Obama administration foreclosure prevention plan designed to help at least 2 million homeowners has enlisted fewer than 20,000 so far.
Lawrence Yun, chief economist of the National Association of Realtors, cast blame on banks forced to reject loans based on low appraisals.

"Pending home sales indicated much stronger activity, but some contracts are falling through from faulty valuations that keep buyers from getting a loan," Yun said.

"In the past month, stories of appraisal problems have been snowballing from across the country with many contracts falling through at the last moment."

Another possible explanation for the local slippage in sales: Foreclosure homes, a mainstay of the market for most of this year, didn't sell as well in May as they did in April.

For example, in Pinellas County, bank-owned homes represented 24 percent of sales in March and 22 percent of sales in April. But in May, that number declined to 20 percent. That could also explain why prices steadied: fewer foreclosure homes to suppress housing values.

"While one month of data does not a trend make, it is the first green shoot we have seen in some time as far as prices are concerned," said Sean Snaith, economist at the University of Central Florida. "Until prices stop declining, we cannot state with confidence that the housing market has stabilized."

Overall sales in Florida rose 16 percent year over year, from 12,044 to 13,921. Prices statewide fell 29 percent, from $203,800 last year to $144,400 in May. Driving much of the business were sales surges in places like Orlando and Cape Coral/Fort Myers.

Though Orlando housing prices stood a hair over Tampa's, sales there soared 31 percent in May. Home closings in Fort Lauderdale rose 47 percent last month.

Realtors urging hike in conventional loan limits

By Jeff Ostrowski
Palm Beach Post Staff Writer

Three years ago, anyone with a pulse, a dismal credit score and an optimistic view of his financial future could score a mortgage for half a million dollars or more.

Today, even borrowers with hefty down payments, stellar credit scores and big personal balance sheets find it nearly impossible to land so-called "jumbo" mortgages, as loans of more than $417,000 are known.

"It's horrible," says Bobby Bashwiner, a loan officer at Group One Mortgage in Jupiter. "You have to have at least 30 percent down. You need a 700 credit score. You can hardly find a fixed rate. And if it's a condo, lenders won't even look at it."

In another symptom of how drastically the real estate market has changed in the past three years, lenders have all but stopped making jumbo loans. The credit crunch is one reason the housing recovery of recent months has skewed heavily toward low-cost homes, while properties priced for more than $500,000 can languish on the market for months or years.

Realtor Randy Bianchi of Paradise Properties in West Palm Beach has a $600,000 listing in a gated community that has been on and off the market since 2006. "There's just no activity," Bianchi says.

Other sellers of higher-end properties voice similar frustrations. In Palm Beach County, sales of under-$500,000 homes have increased during the past two years, but sales of over-$500,000 properties have plummeted, according to statistics from the Realtors Association of the Palm Beaches
"There's much more activity in the under-$500,000 category right now than the over-$500,000 market, that's for sure," says Scott Agran, head of Lang Realty in Boca Raton
The trend is the same nationally. Inventories of over-$750,000 homes have soared in the past two years, the National Association of Realtors says.

Where does blame lie?

All of this raises this chicken-and-egg question: Is the high-end housing market so slow because there are so few jumbo loans? Or are there so few jumbo loans because there are so few buyers of high-end homes?

Dennis S. Hudson III, head of Seacoast National Bank in Stuart, says the jumbo credit crunch is only part of the problem.

"A far larger issue is lack of buyers," Hudson says. "The folks who have been hit hardest in many ways are wealthier folks."

But the National Association of Realtors sees the lack of jumbo loans as a significant obstacle to high-end sales.

"The jumbo loan problem has been hindering that market," says association Chief Economist Lawrence Yun.

That is not expected to change when the latest existing-home sales figures are released Tuesday. As a result, the Realtors group is urging Congress to raise conventional loan limits to as much as $729,500 for high-cost markets such as New York, California and Hawaii. President Bush raised loan limits to those levels for 2008, but the move was nearly meaningless for Palm Beach County, where jumbo limits rose from $417,000 to $423,500.

Mortgage giants Fannie Mae and Freddie Mac still buy loans under $417,000, which means "conventional" mortgages are more plentiful than jumbo loans. And with Federal Housing Administration loans growing more popular, the FHA recently raised its loan limits to $423,750 for Palm Beach County and $375,000 for the Treasure Coast.

No more securitization

But last year's mortgage meltdown put an end to the once-thriving practice of securitizing jumbos, in which Wall Street players snapped up big mortgages and resold them to investors. Investment banks Bear Stearns and Lehman Brothers were among the players in that frenzied market. When they collapsed, so did the jumbo market.

"Loans over $500,000 are very, very difficult to get, because there's no securitization in the mortgage market anymore," says Bill Davis, head of Private Funding Specialists, a mortgage banking firm in Palm Beach Gardens. "The securitization is the key. When Lehman went down, that took away the oil that drove the engine."During the mortgage boom, jumbo loans were a great deal. They cost only a quarter of a percentage point more than conventional mortgages. But amid the jumbo loan credit crunch, that gap has soared. The spread between conventional and jumbo loans rose to as much as 1.79 percent this year, says Bankrate.com of North Palm Beach.

That gap rankles the affluent borrowers who take out jumbo mortgages.

"Realtors are saying their clients just don't want to enter the market because they feel cheated," Yun says. "They say, 'I have high income, I have good credit - why is everybody else paying less than I am?'"

Signs of life

That's not to say the high-end housing market has completely shut down. Palm Beach County saw 86 sales of properties for more than $500,000 in May, according to the Realtors Association of the Palm Beaches.

Some buyers paid cash. Some took out mortgages for $417,000 and covered the rest of the purchase price with large down payments or with home equity lines of credit.

And some took out adjustable-rate mortgages from lenders such as Seacoast National Bank, which has moved cautiously into the jumbo market. Seacoast is making adjustable-rate jumbo loans and keeping them rather than selling them to Wall Street.

"There is opportunity there, but we have to be very careful in the jumbo market," Hudson says.

After the housing crash exposed the risks of loose lending, Seacoast and other lenders are making loans only to borrowers who make large down payments and boast bulletproof credit histories.

Says Hudson: "Everything has to be perfect."

Florida real estate crash means Tampa Bay homes are too cheap, report says

James Thorner, St. Petersburg Times Staff Writer , Jun 05, 2009

Tampa Bay area homes are too cheap. You read that right. According to IHS Global Insight, a economic forecasting company based in Lexington, Mass., our real estate is undervalued.

IHS took a measure of our depreciated home prices, population density, household income and historical attractiveness and insists our median home price of about $131,000 is 16.9 percent too low. Three years ago, when a typical home sold for $186,400, IHS deemed us 30 percent overvalued.

Florida's most stressed real estate region, Cape Coral-Fort Myers, was among the 10 most undervalued among 330 markets examined by IHS. Overvaluation remains a problem in places like the Pacific Northwest, south New Jersey and North Carolina

Pending sales for homes headed up

Realtors are optimistic, but mortgage brokers remain wary

By Tom Bayles


The National Association of Realtors reported Tuesday that the number of homes under contract for sale in April posted the largest monthly jump in nearly eight years.

The spike in "pendings" was touted as a sign that sales are coming to life after a long and painful slump since the housing boom ended three years ago.
"The pronounced increase in April does indicate that actual existing home sales are poised to rise in the coming month or two," wrote Joshua Shapiro, chief U.S. economist with MFR Inc.

But local mortgage brokers and a noted Florida economist say that the housing industry is spewing hyperbole.
Tom Flood of Sarasota's Covenant Mortgage said 90 percent of his closings today involve short sales, deals where a lender agrees to accept less than what is owed on a property, or foreclosures -- and about 20 percent of them never consummate.

This is the eye of the storm, and it is not good news," he said. "You have to be careful with pending sales going through the roof.
In a normal market, Flood said, less than 5 percent of pendings fail to close. Not today.
"We jokingly call short sales long sales," he said. "You just cross your fingers."
The National Association of Realtors's seasonally adjusted index of sales contracts signed in April surged 6.7 percent to 90.3, far exceeding analysts' forecasts. It was the biggest monthly jump since October 2001, when pending sales rose 9.2 percent.
Economists surveyed by Thomson Reuters expected the index would edge up to 85 from 84.6 in March. Typically the index is a barometer for future existing home sales.

The index was 3.2 percent above last year's levels and has risen for three straight months after hitting a record low in January.
The big boost likely reflects the impact of a new $8,000 tax credit for first-time homebuyers that was included in the economic stimulus bill signed by President Barack Obama in February, Lawrence Yun, the Realtors' chief economist, said in a statement.

Even Yun, however, tempered his remarks.

He, too, cautioned that the pending sales data is more volatile than in the past because many sellers need banks to agree to a short sale, which is a difficult and time-consuming process that can wind up falling apart before the deal closes.
Matt Augustyniak, owner of Manatee County's Horizon Realty, which has a mortgage wing, said rules put into place by the Mid-Florida Multiple Listing Service water down the optimism that a spike in pendings would otherwise bring.

Pending home sales in Manatee, Sarasota and Charlotte counties combined rose 18.38 percent in April, according to an analysis of Trendgraphix data by Sarasota-based Michael Saunders & Co., which had its largest number of pendings in April since March of 2004.

Sean Snaith, a University of Central Florida economist, said the national rise in pendings is evidence that the market is at or near bottom. But he cautioned that there must be several quarters of positive news on many economic fronts before he would say things are normal.

"We've seen foreclosure sales perk up, but now we need to see some stabilization in prices before we start talking about the housing market being back in balance," he said. "I want to see the signs that the patient is completely healthy, not just that his blood pressure is down."

Recovery Act’s Homebuyer Tax Credit Can Immediately Help Thousands of First-Time Homebuyers

RISMEDIA, June 1, 2009

Speaking to the National Association of Home Builders Spring Board of Directors Meeting, U.S. Housing and Urban Development Secretary Shaun Donovan announced that the Federal Housing Administration (FHA) will allow homebuyers to apply the Obama Administration’s new $8,000 first-time homebuyer tax credit toward the purchase costs of a FHA-insured home. Donovan said that this action will help stabilize the nation’s housing market by stimulating home sales across the country.

The American Recovery and Reinvestment Act of 2009 offers homebuyers a tax credit of up to $8,000 for purchasing their first home. Families can only access this credit after filing their tax returns with the IRS. This announcement details FHA’s rules allowing state Housing Finance Agencies and certain non-profits to ‘monetize’ up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments. Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5% of appraised value or their closing costs, which can help achieve a lower interest rate.Read more:

We believe this is a real win for everyone,” said Donovan. “The Obama Administration is taking another important step toward accelerating the recovery of the nation’s housing market. Families will now be able to apply their anticipated tax credit toward their home purchase right away. At the same time we are putting safeguards in place to ensure that consumers will be protected from unscrupulous lenders. What we’re doing will not only help these families to purchase their first home but will present an enormous benefit for communities struggling to deal with an oversupply of housing.”

Currently, borrowers applying for an FHA-insured mortgage are required to make a minimum 3.5% downpayment on the purchase of their home. Current law does not permit approved lenders to monetize the tax credit to meet the required 3.5% minimum down payment, but, under the terms of this announcement, lenders can now monetize the tax credit for use as additional down payment, or for other closing costs, which can help achieve a lower interest rate. Buyers financing through state Housing Finance Agencies and certain non-profits will be able to use the tax credit for their downpayments via secondary financing provided by the HFA or non-profit. In addition to the borrower’s own cash investment, FHA allows parents, employers and other governmental entities to contribute towards the downpayment. This action permits the first-time homebuyer’s anticipated tax credit under the Recovery Act to be applied toward the family’s home purchase right away. Unlike seller-funded down-payment assistance, which was a vehicle for abuse, this program will allow homebuyers to shop for the best home price and services using their anticipated tax credit.

According to estimates by the National Association of Home Builders, the Administration’s homebuyer tax credit will stimulate 160,000 home sales across the nation- 101,000 of which will be first-time buyers who will receive the credit. Another 59,000 existing homeowners will be able to buy another home because a first-time buyer purchased their home. Given FHA’s current market share, it’s estimated that thousands of families will be able to purchase a home by allowing the anticipated tax credit to be applied toward their purchase together with an FHA-insured mortgage.

Homebuyers should beware of mortgage scams and carefully compare benefits and costs when seeking out tax credit monetization services. Programs will vary from organization to organization and borrowers should consider whether the services make sense for them, as well as what company offers the most suitable and affordable option.

For every FHA borrower who is assisted through the tax credit program, FHA will collect the name and employer identification number of the organization providing the service as well as associated fees and charges. FHA will use this information to track the business closely and will refer any questionable practices to the appropriate regulatory agencies, as necessary.

For more information, visit www.hud.gov.