John Beckett's Real Estate Blog

Americans who are brave enough to buy a home despite persistent predictions of a double dip in housing may want to contact the federal government, as the recession and financial crisis have turned Uncle Sam into one of the largest owners of real estate in the United States.

Rising foreclosures

The housing bust has led to an unprecedented number of foreclosures in the U.S. In May, 322,920 foreclosure notices were filed against homeowners, and more than 3 million homes have been seized over the last five years from delinquent borrowers. While most homebuyers may assume that banks are the only source of foreclosures, the U.S. government also owns many residential properties because of its role in buying and guaranteeing mortgages. Many of these properties are held because of the conservatorship established in 2008 over the government-sponsored enterprises popularly known as Freddie Mac and Fannie Mae.

Freddie Mac

The Federal Home Loan Corp., or Freddie Mac, owned approximately 45,000 multifamily and single-family homes at the end of 2009. The company put a gross value on these properties of $5.13 billion. Freddie Mac obtained these properties by being the highest bidder at foreclosure auctions when the properties were used as collateral for loans owned by the company, or when owners just transferred the property to Freddie Mac without going through foreclosure. Freddie Mac is furiously attempting to dispose of these homes, and has been fairly successful; the company’s average holding period for real estate is less than one year. The company markets the homes through HomeSteps, where buyers can search by state and city.

Fannie Mae

The Federal National Mortgage Association, or Fannie Mae, is also a large owner of foreclosed property. The company owned more than 86,000 single-family homes at the end of 2009, with a value of $8.5 billion. These homes are concentrated in states that were ground zero of the housing bust, with 28% of its inventory in California, Nevada, Arizona and Florida. Fannie Mae also markets these homes intensively, and sold 123,000 in 2009. The company’s official website to sell homes is called HomePath, where buyers can look up inventory near their location.

Other agencies

Another source of homes owned by the government is the Department of Housing and Urban Development. HUD obtains its properties through foreclosure auctions on Federal Housing Administration-insured loans. HUD has a website at hud.gov Next up is the Federal Deposit Insurance Corp., which owns its inventory through its role in seizing failed banks. The FDIC owns single-family homes but also has a large number of other properties, including industrial and commercial properties and raw land. The Veterans Affairs Department and the Agriculture Department also play roles in financing and guaranteeing home loans, so both own single-family home and other properties. Buyers can look for their dream home through these agencies as well.

Buyer beware

Buyers shopping for homes from the government should be aware of the disadvantages of the process.  Many agencies offer properties “as is,” with no warranties on their condition. There is also little flexibility on negotiating the terms of the contract if the government accepts your offer. Fannie Mae, for example, does not accept offers for houses that are contingent on a buyer selling a currently owned home.

Read at: http://realestate.msn.com/article.aspx?cp-documentid=24796144

As mortgage rates hit a new record low this week, two questions come to mind:

• How low will rates go?
• And when will they head back up again?

The average rate for a 30-year fixed-rate loan fell for the third straight week, to 4.57%, down from 4.58% last week, according to Freddie Mac’s weekly Primary Mortgage Market Survey. The average rate for a 15-year loan was 4.07%, up from 4.04% last week. The 30-year rate is the lowest since Freddie Mac started keeping records in 1971 and the lowest recorded by the Bureau of Economic Statistics since February 1955, when home-loan terms were shorter than 30 years.  The number of refinancing applications rose 9.2% last week, the Mortgage Bankers Association said, as more people who refinanced last year, when rates were about 5.5%, see benefits to refinancing again. The number of applications for home purchases, however, continued to decline.  Why are rates so low? It’s the economy. Amy Hoak of MarketWatch explains, mortgage rates are low because of fears about the economy, both in the United States and abroad. She interviewed Greg McBride of BankRate.com, who said: When investors get nervous, they flock to safe-haven investments such as government debt. Mortgage rates are priced relative to yields on U.S. government debt. The decline on government bond yields has directly benefited the mortgage shopper. And when will rates start to rise? I left my crystal ball in my other office, but the short answer, obviously, is when the economy improves.  David Dessner, director of sales for New York’s GuardHill Financial mortgage company, told said: So keep an eye on when investors start moving their money from U.S. Treasury bonds to other venues. That’s when rates will start to inch up. Remember that the published weekly number is an average gathered nationwide, so the actual rate customers are offered can vary. In fact, mortgage rates offered by a given lender on a given product can change daily, or even several times a day.  The irony of the record-low mortgage rates, of course, is that so few people can refinance or can afford to buy because of the same economic conditions that are keeping rates low. Ted C. Jones, a title company economist in Houston who was interviewed by Holden Lewis of Bankrate.com, has what he calls “a great way to get money in the pockets for people to recover from this economy”: Allow anyone who is up to date on mortgage payments to refinance at the current market rate, even if they owe way more than their home is worth.  If you’re one of the lucky few Americans who have at least 20% equity in your home, a solid income and good credit, you may want to see if refinancing could save you money. Refinancing a $250,000 mortgage from 5.5% to 4.5% would save about $150 a month.  But whether refinancing provides a true savings depends on whether you’ll live in the house long enough to recoup your closing costs, which vary widely across the country.  Is this a good time to buy a house or should you wait for rates to go lower? Or rush now for fear rates will spike soon? This assumes, of course, you have a down payment, a secure job and good credit — things many Americans lack these days.  McBride and other experts  expect rates to rise by the end of the year, but McBride points out that 5.5% is still a low rate, by historical standards. On a $100,000 loan, the difference between a 4.5% rate and a 5.5% rate is $61 a month.  The biggest question to ask is whether this is the right time for YOU to buy a house.

Read at: http://articles.moneycentral.msn.com/SmartSpending/blog/page.aspx?post=1779385&_blg=1,1779072