Home Ownership Matters Take Priority at NAR Conference

New Orleans, November 04, 2010


The impact of homeownership on individuals, communities, and the nation's economy will be front-and-center during the 2010 Realtors® Conference & Expo here this week through November 8.

During the opening session, National Association of Realtors® President Vicki Cox Golder reminded attending Realtors® and guests of the challenges ahead.

“In the wake of current economic conditions, some critics have questioned the value of owning a home for families and individuals, and suggested that our government rethink its support of policies and programs that encourage home ownership,” said Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz. “As leading advocates for home ownership and housing issues, Realtors® need to reinforce just how much home ownership matters to people, to communities and to America.”

To drive this point home, current home owners in a pre-taped video shared with the audience their perspectives on how home ownership has changed their lives. The benefits these individuals, couples and families described were as diverse as they were. For some, home ownership provides a sense of community stability and financial security for their children; for others, it gives them the opportunity to establish family traditions, or to build financial security. All of them underscore a belief that owning a home is still a part of the American Dream.

Realtors® believe in that dream, and NAR and its members are actively engaged with lawmakers, government agencies and industry experts to ensure that anyone who is able and willing to assume the responsibilities of owning a home should have the opportunity to do so. Coming just days after the general election, NAR’s annual conference will bring Realtors® and public policymakers together to address issues like government-sponsored enterprise reform, the role of the Federal Housing Administration, foreclosures and short sales, and the availability of credit.

FHA Commissioner David Stevens joined Realtors® at the opening session and shared his concerns with the impact that tight credit policies have had on home ownership. Stevens criticized the current “one-size-fits-all” approach to mortgage lending, and emphasized that each buyer’s qualifications should be evaluated on his or her own merits.

Citing the gap between FHA policy that would allow buyers with a 580 FICO score to qualify for an FHA-insured mortgage and some lender underwriting rules that require FICO scores in the mid-600s and above, Stevens said, “(These policies) are restricting home ownership, and we need to do something about that. One-fifth of the gross domestic product of the U.S. economy is tied to the housing sector, so home ownership matters.”

This year’s Realtors® Conference & Expo is expected to draw approximately 20,000 Realtors® and guests. More than 400 exhibitors are expected to participate in the Expo, which showcases the latest real estate products and innovations across various fields, including technology, data communications and financial programs and services.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.




Information about NAR is available at www.realtor.org. News releases are posted in the Web site’s “News Media” section in the NAR Media Center.

Copyright National Association of REALTORS®, Reprinted from REALTOR.org with permission."

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Nearly 1 in 6 homeowners ‘under water’

NEW YORK – Oct. 9, 2008 – The relentless slide in home prices has left nearly one in six U.S. homeowners owing more on a mortgage than the home is worth, raising the possibility of a rise in defaults – the very misfortune that touched off the credit crisis last year.

The result of homeowners being “under water” is more pressure on an economy that is already in a downturn. No longer having equity in their homes makes people feel less rich and thus less inclined to shop at the mall.

And having more homeowners under water is likely to mean more eventual foreclosures, because it is hard for borrowers in financial trouble to refinance or sell their homes and pay off their mortgage if their debt exceeds the home’s value. A foreclosed home, in turn, tends to lower the value of other homes in its neighborhood.

About 75.5 million U.S. households own the homes they live in. After a housing slump that has pushed values down 30 percent in some areas, roughly 12 million households, or 16 percent, owe more than their homes are worth, according to Moody’s Economy.com.

The comparable figures were roughly 4 percent under water in 2006 and 6 percent last year, says the firm’s chief economist, Mark Zandi, who adds that “it is very possible that there will ultimately be more homeowners under water in this period than any time in our history.”

Among people who bought within the past five years, it’s worse: 29 percent are under water on their mortgages, according to an estimate by real-estate Web site Zillow.com.

The majority of homeowners still have equity, and even among those who don’t, many continue to make their mortgage payments on time. The financial-bailout legislation could at least “keep things from getting much worse” by helping banks avoid the need to tighten credit further, says Celia Chen, director of housing economics at Economy.com. Still, she expects housing credit to remain tight and home prices to decline in much of the country for another year or so.

Prices are back to 2003 levels in the San Diego and Boston metropolitan areas, and back to 2004 levels in Las Vegas, Los Angeles, San Francisco, Fort Lauderdale, Fla., and Minneapolis, according to First American CoreLogic, a data firm in Santa Ana, Calif.

Stephanie and Jason Kirschenman thought they were being prudent when they agreed in late 2004 to buy a new four-bedroom home in Lodi, Calif., for $458,000. They put a substantial 20 percent down and chose a loan with a fixed interest rate for the first 10 years. Two years later, they took out a second mortgage to pay off some bills.

At the time, the home was appraised for about $550,000. But a mortgage broker recently estimated its value at well below the $380,000 the family owes on it, says Ms. Kirschenman. “We were quite shocked,” she says.

The Kirschenmans, who both work for a company that makes trailer hitches, thought about sending the keys to the lender. But their financial planner, Christopher Olsen, helped persuade them to stick with the house, noting that they could still afford the payments.

Others aren’t so lucky. Among mortgages on one- to four-family homes, 9.16 percent were a month or more overdue or were in foreclosure in the second quarter, according to the Mortgage Bankers Association. That compared with 6.52 percent a year before and was the highest level since the association began such surveys 39 years ago.

Falling values have contributed to a sharp pullback in mortgage lending. In the third quarter, mortgage lending fell to the lowest level in eight years – down 44 percent in a year – says the publication Inside Mortgage Finance.

One reason is that as home values slip, growing numbers of would-be borrowers lack sufficient equity to refinance. The falling values also make mortgage lending look riskier to banks, spurring them to tighten credit standards.

Most mortgages in default were issued in 2006 and 2007, when lending standards were loosest and the housing market was peaking. Many who bought then made small down payments or none, so they had little equity in their homes from the start.

The performance of loans made earlier is getting worse, too, as price declines deplete the equity people built up. In Las Vegas, 6 percent of home loans made in 2004 are now 30 days or more overdue, up from 3.7 percent a year earlier, according to research firm LPS Applied Analytics.

In July, Congress enacted legislation designed to help borrowers who owe more than their homes are worth by allowing them to refinance into a government-backed loan, provided their mortgage company forgives part of their principal. It’s not clear how many borrowers the program will help, because before reducing the principal, lenders would almost always try first to freeze or reduce borrowers’ interest rate to make payments more affordable, says Tom Deutsch, deputy executive director of the American Securitization Forum, an industry group.

In contrast with the 12 million home borrowers estimated to be under water, 64 million have equity in their homes. These include 24 million households who own their homes free and clear, and 40 million whose homes remain worth more than is owed on them.

Even so, some borrowers fret that declining prices and tighter lending standards could make it hard for them to tap their equity.

Steven Schneider, a mortgage broker in Miami, bought his home at the end of 1992. When he refinanced about four years ago, he pulled out $150,000 in cash that he intended to use to build an addition. The transaction raised his total debt to about $350,000, at a time when his home had a value of about $650,000.

Recently, Mr. Schneider pulled out roughly $90,000 by tapping a home-equity line of credit. He says he put the funds in a money-market account that yields less than the 5 percent interest rate on the loan. “I was afraid they were going to shut down” access to the credit line, says Mr. Schneider. He figures his home, once valued at $750,000, now is worth about $600,000.

How much pain homeowners feel varies greatly from place to place. The most severe drops in home values are in parts of California, Florida, Nevada, Arizona and other areas where speculation pushed prices up and builders far overestimated demand.

Within metro areas, neighborhoods with short commutes are holding up better than others. And in many parts of Texas and North Carolina, home prices have continued to rise slowly, have leveled off or have declined only modestly.

On a national basis, home prices peaked in mid-2006 after rising 86 percent since January 2000, according to the First American index. Since peaking, that index has fallen 13 percent.

The declines have made homes more affordable, bringing prices in many areas closer to their long-term relationship to incomes. In the second quarter, the median home price of about $203,000 was 1.9 times average pretax household income, according to Economy.com. That was close to 1.87 times income for 1985 through 2000, prior to the housing boom.

Housing markets don’t tend to turn around quickly. The price slump in California in the early 1990s, for instance, was a long grind. According to the S&P/Case-Shiller home-price indexes, Los Angeles prices peaked in June 1990 and didn’t bottom until March 1996. They didn’t get back to their 1990 peak until 2000.

Homeowners get some relief

TALLAHASSEE, Fla. – Oct. 7, 2008 – Countrywide Financial will provide Florida homeowners up to $1 billion in mortgage relief under a settlement reached with the state’s attorney general over alleged abusive lending practices.

The relief will include loan changes for an estimated 52,000 Floridians who could see their principal and interest rates reduced to more affordable terms, and cash payments to some borrowers who lost their homes through questionable lending practices by the company.

Countrywide, once the largest home loan company in the country, was acquired in July by Bank of America, which agreed to the accord.

The settlement stems from a lawsuit by Attorney General Bill McCollum alleging that the mortgage giant used deceptive marketing tactics to sell risky, high-cost loans to Florida borrowers during boom years.

Attorneys general of 11 other states filed similar complaints against the lender.

About 400,000 homeowners nationwide will get $8.4 billion in one of the largest settlements so far in which abusive lending was alleged. McCollum has said his office in recent years received more than 2,000 complaints from Countrywide customers.

The lawsuits claimed that the company stuck homeowners with loans they could not afford and misrepresented or concealed loan features and penalty fees that accompanied them.

Among the loans were pay-option adjustable-rate mortgages, which offered initial teaser rates and low monthly payments that later ballooned. When minimum payments are made, the balance actually grows.

As part of the agreement, Countrywide will launch a program to refinance subprime borrowers and consumers with pay-option ARMs into fixed-rate loans they are capable of repaying. Borrowers must have made their first loan payment before Dec. 31, 2007, and must meet other eligibility requirements.

April Charney, an attorney with Jacksonville Area Legal Aid who specializes in predatory lending cases and foreclosure defense, said too few details were available to determine whether the program would bring significant relief to Countrywide borrowers.

But millions of other homeowners were still struggling under the mortgages they could never afford, she said.

“The techniques that were used to sell these toxic consumer products were industry-wide,” Charney said.

There are about 572,000 active Countrywide loans in Florida, according to the attorney general’s office.

In the settlement, Countrywide also agreed to suspend foreclosures on all subprime and pay-option ARMS until it determines whether borrowers meet the refinancing guidelines.

Countrywide also must waive any fees associated with the refinance, as well as prepayment penalties and late fees.

The attorney general’s office estimates that 52,000 Florida borrowers will be eligible for the refinance program. The total value of fees that will be waived is $17.7 million.

Additionally, the company will make cash payments to certain borrowers who have lost their homes to foreclosure if it is determined they had no chance of making the payments in the first place. These borrowers will have defaulted within the first six months of getting loans. Early defaults are often the telltale sign of bad underwriting or fraud. Underwriting is the scrutiny of loan applications meant to make sure a borrower is able to make payments.

About $20 million of some $150 million for borrowers nationally has been set aside for Florida consumers.

Under a new relocation assistance program, borrowers who are headed to foreclosure also will get cash payments for agreeing to leave their home voluntarily at the time of the public auction.

Arden Shank, executive director of Neighborhood Housing Services of South Florida, said the deal will prevent thousands of people from entering foreclosure.

“We’re working on these kind of mitigation plans for dozens and hundreds of families and this opens another possibility for helping another group of homeowners stay in their homes,” Shank said.

Bank of America bought Countrywide the day after the lawsuit was filed.

The attorney general’s office said the company worked closely with the state to address the lawsuit’s allegations.