NATION'S HOUSING
Bank of America after jumbo mortgages
Though heavily concentrated in California, portions of Florida and the Northeast, higher-cost neighborhoods throughout the country traditionally have depended on the ready availability of “jumbo” mortgages to finance houses.
But with the collapse last year of the private mortgage bond market on Wall Street, home buyers, builders and refinancers who relied on jumbo financing were left with few sources – except at punitively high interest rates and huge down payments.
That's about to change. Major banks are heading into the jumbo segment, originating big loans at affordable rates – not for Wall Street bond traders but for their own investment portfolios.
Bank of America, the country's largest mortgage lender, is rolling out a large program to finance jumbo loans between roughly $730,000 and $1.5 million, with fixed 30-year rates starting in the upper 5 percent range. The loans will be available through the bank's retail network and also through its Countrywide Home Loans subsidiary. After April 27, Countrywide will be rebranded – shedding the name it's had since 1969 – and morph into Bank of America Home Loans. Bank of America acquired Countrywide in 2008.
Barbara Desoer, the bank's head of consumer real estate operations, said there's “a real need” for capital in the jumbo arena, where interest rates last fall sometimes exceeded conventional loan rates by 3 to 5 percentage points – if financing was available at all.
Traditionally, jumbo loans have been defined as any home mortgage whose principal amount exceeded Fannie Mae's or Freddie Mac's statutory high-cost market purchase limit. Most recently that ceiling was $625,500, up from $417,000. But in 2008, Congress temporarily raised the upper limit in high-cost areas for both companies and FHA to $729,750. In the economic stimulus legislation passed by Congress last month, that maximum was extended through Dec. 31 of this year.
Though it will almost immediately become the biggest player in the jumbo loan segment, Bank of America will not be alone. With little fanfare, other financial institutions have become more active.
For example, ING Group, an Amsterdam-based banking and insurance conglomerate, offers jumbos as large as $2 million through its online ING Direct unit. The minimum down payment for an ING Direct jumbo is 25 percent; Bank of America quotes a minimum 20 percent.
ING's jumbos typically are “5/1” and “7/1” hybrids with a fixed interest rate for the first five or seven years, followed by an adjustable rate tied to the LIBOR interbank index for the balance of the 30-year term. Current rates start around 5 percent.
San Diego-based Luxury Loans originates jumbo and “super-jumbo” mortgages of $3 million to $5 million and higher in 50 states for a handful of large commercial banks, who then put them in their investment portfolios.
Victoria Johnson, CEO of Luxury Loans, declined to identify the banks that buy her mega-loans but said their underwriting standards can be rigorous. For example, some investors want proof of substantial cash reserves – at least six months of borrower income – deposited even when down payments are substantial.
Bank of America's new program requires hefty liquid resources – six months of principal, interest, property tax and insurance payments in reserve – plus fully documented income, solid credit scores, and a full appraisal.
In Fort Collins, Colo., Brian Shaver, senior loan officer for 1st City Mortgage Group, originates jumbos through MortgageBase.com, selling them to banks in this country and as far away as Hong Kong. For a loan of $1.5 million to $2.5 million, MortgageBase wants a 40 percent down payment and liquid reserves of 50 percent of the loan amount to qualify for a 4.875 note rate on a 5/1 hybrid.
Johnson of Luxury Loans says she welcomes Bank of America's entry into the mass-market jumbo arena. “We need them,” she says, “because there's been a really serious lack of liquidity at this end of the market” – and that has hurt home prices throughout California as well as parts of the East Coast.
“The more competition,” she says, “the better.” Properly underwritten with solid down payments, large reserves and high credit scores, “jumbos are probably a smart move” for large and small banks that have capacity in their portfolios.
Bottom line: If you've been postponing a purchase, sale or refi because the loan amount you need is too big for Fannie, Freddie or FHA, check out the new, non-Wall Street sources of jumbos.
USA Gymnastics Region V Trampoline & Tumbling Championships Chooses Charlotte Harbor & the Gulf Islands
Championship is Second Sporting Event at the
Charlotte Harbor Event & Conference Center
CHARLOTTE HARBOR & THE GULF ISLANDS, Fla. (April 23, 2009) – Gymnasts from eight Southeastern states will participate in the USA Gymnastics Region V Trampoline & Tumbling Championships at the Charlotte Harbor Event & Conference Center in Punta Gorda, Fla., May 16 – 17, 2009. Between 400 and 500 elite-level youth athletes of all ages are anticipated to compete as well as 20 local gymnasts from Horizon Gymnastics.
“Having successfully held the AAU Fall State Gymnastics Championship at the Charlotte Harbor Event & Conference Center in December of last year, I knew the USA Gymnastics Region V Trampoline & Tumbling Championships would be the right fit for Punta Gorda,” said Shelly Proa, co-founder of Horizon Gymnastics & Dance Academy in Port Charlotte. Proa worked with Sean Doherty, Sales and Sports Marketing Manager for the Charlotte Harbor Visitor & Convention Bureau, to land the event which is the second sporting competition for the new 45,000 square-foot event and conference center.
Participating age categories are: 6 and younger, 7 and 8, 9 and 10, 11 and 12, 13 and 14, 15 and16, and 17 and older. Admission to the event is $10 for adults ages 12 and older, $5 for children between the ages of 3 and 11, and under 3-years-old are admitted free.
Horizon Gymnastics & Dance Academy is the host club for the event and can be contacted for more event information at (941) 627-5342 www.horizongymnastics.net. Additional event information can be found on the Florida Trampoline and Tumbling Web site at www.usagfltrampoline.net.
About Charlotte Harbor & the Gulf Islands
Located halfway between Tampa and Naples on the Southwest Florida Gulf coast, Charlotte Harbor & the Gulf Islands is a charming collection of nine coastal communities surrounding the state’s second largest harbor. Florida’s premier year-round eco-tourism destination, Charlotte Harbor & the Gulf Islands offers a pristine unspoiled beauty that has served as the backdrop for seven major feature films as well as countless memorable vacations. A haven for outdoor enthusiasts, Charlotte Harbor & the Gulf Islands has been named to SAIL magazine’s “10 Greatest Places to Sail in the United States,” ranked by Golf Digest as “Third Best Place to Live and Play Golf in America,” and rated by MONEY magazine as one of the “Best Places to Live in the South.” The city of Punta Gorda was named in September as one of “Top Ten Places to Retire Healthy” by U.S. News & World Report. Englewood, Fla. was just named as #2 of the Top Ten emerging travel destinations in the U.S. by TripAdvisor.com.
For information about area events, activities and attractions, contact the Charlotte Harbor Visitor & Convention Bureau, 18501 Murdock Circle, Suite 502, Port Charlotte, FL 33948; (941) 743-1900, or call toll free at 1-800-652-6090 for a free Visitor’s Guide; or visit the Web site at www.CharlotteHarborTravel.com.
WASHINGTON, April 02, 2009
The Federal Housing Administration is a primary source of mortgage financing for millions of America’s families and plays a key role in helping bring stability to the housing market. This is the message that the National Association of Realtors® delivered to the Senate Appropriations Subcommittee today.
“Without FHA financing, families would be unable to purchase homes and communities would suffer from continued foreclosures and blight,” said Lennox Scott, a member of NAR’s Real Estate Advisory Board and CEO of John L. Scott Real Estate in Bellevue, Washington. In his testimony, Scott shared NAR’s belief in the importance of FHA and concern for the safety and soundness of its programs due to its dramatic growth over a short period of time.
“We believe that FHA has done a good job stepping up to today’s market challenges. However, along with the dramatic growth in market share comes greater responsibility and the need for increased infrastructure and staff,” Scott said. Over the past 18 months, FHA has handled an increase in volume four times greater than 2007 levels, increasing its market share to over 30 percent.
NAR suggests a number of FHA improvements that will help maintain safe and affordable FHA loan products. These improvements include investment in staff and technology improvements; increased oversight and risk management; technical correction to help implement FHA programs; and monetizing the $8,000 first-time home buyer tax credit to allow buyers to apply it toward downpayment requirements.
“The U.S. Department of Housing and Urban Development has made a number of important and valuable changes to FHA over the years that has enabled it to stand up to the challenges of today’s mortgage market,” Scott said. “FHA is now a principal source of financing for millions of America’s families, and without it, the economic crisis would be significantly prolonged. This is why it is so important to invest in FHA improvements and advancements.”
NAR pledged to continue to work for FHA reforms that will ensure the continued success, availability and safety of FHA mortgage insurance programs.
WASHINGTON, April 01, 2009
Pending home sales have edged up, hinting at a possible pickup of sales activity in coming months, according to the National Association of Realtors®.
The Pending Home Sales Index,1 a forward-looking indicator based on contracts signed in February, rose 2.1 percent to 82.1 from a reading of 80.4 in January, but is 1.4 percent below February 2008 when it was 83.3.
Lawrence Yun, NAR chief economist, said the market is continuing to underperform. “Pending home sales have a way to go for there to be a meaningful increase, but recent increases in shopping activity are hopeful indicators that we’ll see additional sales gains,” he said. “More buyers are getting into the market to take advantage of stimulus incentives and much improved housing affordability conditions, but it will take a few months before we could see this turn up in measurable sales contract activity.”
Also in February, NAR’s Housing Affordability Index2 rose to a new high.
The PHSI in the Northeast rose 10.6 percent to 63.9 in February but is 11.2 percent below a year ago. In the Midwest the index jumped 14.5 percent to 83.1 and is 3.4 percent higher than February 2008. The index in the South rose 4.4 percent to 85.8 in February but is 0.1 percent below a year ago. In the West the index fell 13.5 percent to 89.6 and is 1.7 percent below February 2008.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said home buyers are in an excellent position. “The drop in mortgage interest rates and home prices mean the buying power of a typical family has never been better,” he said. “If you have a good job and long-term plans, it’s unlikely that you’ll find a much better time to buy a home. This is especially true for first-time buyers who can qualify for an $8,000 tax credit this year, have a great selection of homes to choose from, and are in a favorable negotiating position.”
NAR’s Housing Affordability Index rose 0.9 percentage points to a record high of 173.5 in February from an upwardly revised index of 172.6 in January, and is 36.3 percentage points higher than a year ago. The HAI, a broad measure of housing affordability using consistent values and assumptions over time, shows that the relationship between home prices, mortgage interest rates and family income is the most favorable since tracking began in 1970.
A median-income family, earning $59,700, could afford a home costing $285,600 in February 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 that amount. The affordable price is considerably higher the median existing single-family home price in February, which was only $164,600.
“Obviously, potential home buyers need to be managing their existing debt effectively,” McMillan said. “A Realtor® can counsel you on what you may be able to afford given your personal financial situation. In some cases, buyers who want to build their future through homeownership may need to start reducing their debt and improving their credit score before entering the housing market.”
Last year at this time, the typical family could afford a home costing $265,600, which is $20,000 less than the current affordable price. “Homes in many areas are now selling for less than replacement construction costs – clearly this is an abnormal situation which will change once inventory is drawn down and supply and demand come closer into balance,” McMillan said.
Yun said he expects housing inventories to rise through early summer from a normal seasonal pattern of more sellers appearing in the spring. “But with the positive housing stimulus incentives now in place, we expect home sales to gain momentum in the second half of the year with first-time buyers absorbing a lot of the excess inventory,” he said. “Under these conditions, we should see price stabilization in most markets by the end of the year.”
Gloomy Economy Drives Growth of Vacation Rental Industry Spurs Increased Interest in Renting Among Second Home Buyers
AUSTIN, TX, March 30, 2009 — HomeAway, Inc. the world’s largest online vacation rental marketplace, today released research confirming the economy is playing a significant role in the growth of the vacation rental industry and in creating opportunities for second home owners.
According to proprietary research commissioned by HomeAway® as part of the National Association of Realtors’ (NAR) 2008 Investment and Vacation Home Buyers Survey released today, the economy has more second home owners than ever before deciding to rent their homes to vacationers.
While the NAR reports a sharp decline in total second home sales for the second consecutive year, the percentage of buyers purchasing with the intent to rent has more than doubled since 2005, reaching a record-high of 27 percent in 2008.
Even for the second home buyers who do not intend to rent over the next 12 months, nearly two-thirds (66 percent) say the economy has increased their interest in renting at some point in the future, reveals the HomeAway proprietary questions.
It also shows owners plan to make their vacation properties available to rent for 15 weeks per year – up from 12 weeks in 2007— and consider the Internet an important marketing tool, with 74 percent planning to advertise online, up from 70 percent in 2007.
These results are consistent with the first major study on the industry released in January 2009, PhoCusWright’s Vacation Rental Marketplace: Poised for Change, which estimates the U.S. vacation rental industry at more than $24 billion, and also projects significant growth in online vacation rental revenues over the next two years.
This same study found owners advertising on the HomeAway sites, HomeAway.com, VRBO.com and VacationRentals.com, spend on average 43 percent less on marketing their vacation rentals, and yield more online booking inquiries and revenue than other sites.
“The down economy has had a significant positive impact on the vacation rental market,” says Brian Sharples, founder and CEO of HomeAway. “NAR’s survey shows more second home owners than ever are realizing that from the get-go they can offset the cost of ownership and in many cases profit from their second homes by renting them out.” In fact, HomeAway owners average $20,000 a year in rental revenue.Florida Gold International Real Estate has noticed a sharp increase this year in late bookings and CEO, Gordon Robinson says "with so many people buying resale properties at such low prices renting can make for a very stable investment".
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