Reverse Mortgage Loan for Purchase Program

22 08 2009

There is a new program designed to help seniors use a reverse mortgage to help buy a home, provided they can come up with a large down payment. In fact, it’s a significant down payment (twice the amount of a normal down payment.) It is the same underlying product that has been around for 21 years but it allows people to use it for purchase finance as opposed to a refinancing tool.

Before the Home Equity Conversion for Purchase program rolled out in January, seniors 62 years and older could only use reverse mortgage loans to draw out tax-free payments from the equity held in an existing home while continuing to live in it. Many lenders are now starting to offer these new loans in addition to traditional reverse mortgage products. But as with traditional reverse mortgages, there are costs involved that can add thousands of dollars to the loan amount, which grows over time and has to be repaid after the last borrower leaves or sells the property or dies and the home is passed on to heirs.

Program participants are required to make a downpayment typically ranging from 30 to 40 percent. The reverse mortgage loan amount is used to pay off the balance of the new home’s purchase price.

People who have a traditional reverse mortgage on an existing home cannot refinance it into a reverse mortgage for purchase to buy a new home. Instead, the reverse mortgage on the existing home would have to be paid off before applying for the reverse mortgage for purchase.

The reverse mortgage for purchase program requires that the new home be the primary home, which means living it in for at least six months of the year. The home can be located anywhere in the United States.

Borrowers never have to make a mortgage payment as long as they live in the primary home. Unlike with traditional reverse mortgages that require seniors to be homeowners, renters are not excluded from the new program. And if you already own a home, there is no requirement to sell it. In fact, you could rent it out.

Before taking out a reverse mortgage for purchase loan, borrowers are required to receive counseling from a nonprofit agency approved by the Department of Housing and Urban Development.

“It’s a new way to use a reverse mortgage. It’s catching on pretty fast,” said Tricia Smith of San Mateo-based HIP Housing, a HUD-approved loan counseling agency in San Mateo.

While it may be the right move for some people, borrowers need to be aware of closing costs, fees and Federal Housing Administration mortgage insurance premiums that can add thousands of dollars to the cost of the loan. Typically, those extras are financed in the loan amount.

The loan amount available to borrowers is tied to a percentage of the current reverse mortgage $625,500 lending limit or appraised value of the purchased home, whichever is lower. The older the borrower, the higher the percentage. The $625,500 lending limit amount expires at the end of 2009 unless Congress acts to extend it.

The down payment money that borrowers have to come up with has to be from savings, retirement income or proceeds from the sale of an existing home. If the existing home is sold to provide the down payment for the new home, there are fewer closing costs involved than if the transactions were done separately.

Once the title on the home changes hands, the loan amount, along with accrued interest, mortgage insurance premiums and other fees, has to be repaid to the lender.

“It’s not free money. It’s a rising debt loan,” said Smith.

That said, the product can be used to help retirees downsize to a smaller home or help renters become homeowners, she said. “They won’t have to make a (mortgage) payment for the rest of their life,” Smith said.

Source: Contra Costa Times

US Existing Home Sales Seen at 10-Month High in July

22 08 2009

Another exciting news in the media today. Reuter just posted another article. See below:

U.S. sales of existing homes likely rose to their highest level in 10 months in July, according to a Reuters poll, as buyers rushed to take advantage of a tax credit for first-time homeowners.

The survey of 61 economists predicted sales of previously owned homes climbed to a seasonally adjusted annual rate of 5 million in July, the briskest pace since 5.1 million units were sold in September, from 4.89 million units in June.

That would also mark the fourth straight monthly gain in home resales.

As part of the American Recovery and Reinvestment Act, the Obama administration has made up to $8,000 available to qualifying taxpayers who buy homes this year. The program, credited for the signs of a turn around in the three-year housing slump is scheduled to end in November.

Adding to the picture of a steadily improving resale housing market were still relatively low mortgage rates, an improving economic outlook, and the fifth straight monthly rise in pending home sales, analysts said.

The following is a selection of comments from economists.:


Forecast: 4.99 million units

“Affordability looks good, though it’s off record highs because of firming mortgage rates and sagging incomes. Cheap, foreclosed properties still account for roughly one-third of sales, but overall demand is starting to revive.”


Forecast: 4.95 million units

“This would be the fourth consecutive rise and, if realized, sales would be roughly back in line with the level that prevailed from the fall of 2007 to October 2008. Gains in affordability over the last year, more foreclosure sales, and an improving economy could then lift sales further later in the year.”


Forecast: 4.99 million units

“Existing home sales will probably continue to firm in coming months as the economy begins to rebound, more foreclosures come on to the market, and prospective buyers take advantage of increased affordability. One possible concern is an apparent increase in the share of contracts falling through and not being counted as home resales. The increase in the share of scuttled contacts is apparently being caused by new rules that produce more conservative valuations, and have prevented some potential home buyers from obtaining financing.”

Source: Reuter

New Credit Rating Guidelines Punish Homeowners with Loan Modification

22 08 2009

It’s hard enough to modify terms of a home mortgage, despite the federal government’s efforts to ease those procedures for individuals desperate to hold onto their houses. Unfortunately, the “Big Three” credit bureaus – Equifax, Experian and TransUnion – have issued new guidelines that allow lenders to report new mortgage loan modifications as “partial payment status,” a designation that could lower an individual’s credit score by more than 50 points.

A loan modification doesn’t reduce the principal, but makes it easier for homeowners to repay what’s owed by reducing the interest rate and stretching the length of the original loan. Credit agencies are paid to assess credit risks, and that includes people who can’t pay their mortgages. But these are extraordinary times. Penalizing a homeowner for successfully re-negotiating a loan could have the unwanted consequence of inducing more foreclosures.

First American CoreLogic, a real estate analysis firm, says more than 15 million mortgage holders, or 32.2 percent, are “upside down” on their mortgages, meaning they’re paying more than their houses are worth. In Florida, the negative-equity picture is worse at 49 percent, and the figures are even higher in South Florida, hovering around 51.5 percent in the Miami-Fort Lauderdale area.

Now, thanks to the credit-rating agencies and an indifferent government bureaucracy of financial regulators, there will be homeowners who will unnecessarily become credit risks. While a loan modification provides a better outcome than a short sale, foreclosure or bankruptcy, punishing homeowners who work with their lenders is counterproductive.

Source: The Sun Sentinel

Florida’s Population Drops

21 08 2009

The recession and housing market bust are likely causes for the first decline in Florida’s population since 1946, University of Florida researchers said.

The university’s Bureau of Economic and Business Research estimated the state’s population slipped by 58,294 people, to 18,748,925 on April 1 from 18,807,219 in April 2008.

The last official, final census count – in 2000 – was 15,982,824.

“You can look at the one-year change if you want, but given the housing boom and bust, it’s possible that our bigger estimate included some speculative housing numbers,” said Scott Cody, a research demographer at the bureau. “You also may have had a lot of temporary residents still in 2008 – construction workers who were here and renting – and they were able to move.”

Cody said Florida’s natural attraction to retirees and as a vacation destination will probably continue to fuel growth after the economy improves.

Source: University of Florida’s Bureau of Economic and Business Research

Easy to Find Work in Jacksonville

19 08 2009

It’s easier to find a job in Jacksonville than any other city in the U.S. except for Washington, D.C., according to jobs search engine

The largest 50 cities in the U.S. were ranked by comparing the number of unemployed to the number of job postings.

Personally, I think it’s great news for the city. went on to say that Jacksonville had three job postings per unemployed person. D.C. had six job postings for every one unemployed person in June. Baltimore is No. 3, where there is one posting per unemployed person.

Among the cities where it’s hardest to find open jobs were Los Angeles and Riverside, Calif., Miami and Detroit, where there are 18 unemployed people for every one job posting.

Home Builder Confidence Up in August

19 08 2009

A confidence index among home builders inched up in August to its highest level in a year.

The National Association of Home Builders/Wells Fargo Housing Market Index reached 18 this month, which was its highest since June 2008, said a news release.

“Home builder expectations have been buoyed by the success of the first-time home buyer tax credit and its anticipated boost to buying activity leading up to the Nov. 30 expiration date,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla.

“The question is what happens after that – whether there will be enough momentum to keep us moving toward a recovery, particularly in light of significant headwinds such as the severe credit crunch for housing production loans and inappropriate appraisal practices that are scuttling a quarter of all new-home sales.”

Sales expectations for the next six months saw the biggest gain in the index, followed by traffic of prospective buyers – four-point and three-point increases, respectively. Current sales conditions in the index remained unchanged.

All regions of the country saw a gain in the confidence index except for the South, which had a one-point decline.

Source: National Association of Home Builders

Shareholders OK Pulte-Centex Merger

19 08 2009

Shareholders of both Pulte Homes Inc. and Centex Corp. approved the merger of the two companies on 8/18/09 for a total value of $3.1 billion.

Under terms of the merger agreement, Pulte Homes will acquire all outstanding shares of common stock of Centex in a stock-for-stock transaction valued at $1.3 billiion, plus a net debt of $1.8 billion.

Centex shareholders receive 0.975 shares of Pulte Homes stock in exchange for each Centex share they own. Based on the exchange rate, Pulte shareholders own about 68 percent of the combined company and Centex shareholders own about 32 percent.

The combined company will continue to trade on the New York Stock Exchange under the ticker symbol “PHM.”

It will operate more than 900 communities across 29 states and the District of Columbia under the brands Pulte Homes, Centex and Del Webb.

Effective with the completion of the merger, Timothy Eller, previously Centex’s chairman and CEO, joins the company’s board of directors as vice chairman and will serve as a consultant to the company for two years.

Pulte and Centex currently build throughout Florida, but Centex pulled out of the North Florida market in 2008. Pulte is selling homes in eight communities in Jacksonville and Ponte Vedra, the majority of those in Bartram Park.

Source: Jacksonville Business Journal

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