Affordable Housing For All

In a piece in the New York Times today, Edward Glaeser, the famed Harvard economist, made the following comment:

“When housing prices soared, ordinary Americans found it increasingly hard to afford a house. I would certainly cheer if Detroit produced a wonder car for $10,000 that could get 50 miles to the gallon and go from 0 to 60 in five seconds. I would also cheer if the housing industry could produce a beautiful and energy efficient 3,000-square-foot home for $100,000. The same logic pushed me to boo when housing became outrageously expensive. During the boom, I hoped that housing prices would stop rising and even decline.”

Glaeser’s sentiment leads to the following reflection: Isn’t there something appealing about a big beautiful home for $100,000? If housing is a basic right of all Americans (let alone all human beings), then wouldn’t it follow that low housing prices would be a good thing?

Imagine a world in with housing prices were so low that individuals purchasing their homes with cash was commonplace. While mortgages would still exist, they would no longer be necessary for all homebuyers. Perhaps a mortgage would become an option, like the decision purchasers make every day when deciding to make a purchase with cash, credit, or debit. Or, arguably more accurately, like the decision car buyers make when choosing whether to take out a loan or pay with cash.

It is true, as Glaeser pointed out, that low housing prices do have a more dramatic effect on the financial markets than most expected. However, this is only due to the symbiosis that exists between the housing industry, the mortgage industry, and the home goods industry. So many of the problems in the housing crisis were caused by homes being used as an investment vehicle. When home prices fell, borrowers were stuck with homes that were worth much less than their mortgage payments. As more and more borrowers lost their jobs in the subsequent Great Recession, even many whose homes still retained equity found themselves unable to afford their mortgages. And the housing crisis was exacerbated.

The idea of affordable housing for all is a very appealing one. While it does seem hard to imagine a world in which affordable housing for all could be made a reality and where housing prices could fall so as to make homeownership affordable without crashing the economy, before we spend all our time wishing housing prices would go back up, we should consider solutions (esp. long term) where housing does become more affordable, home ownership more stable, and an individual’s right to housing less susceptible to the whims of the economy.

Reverse Mortgage Guides Goes to San Diego

For the rest of the week, Reverse Mortgage Guides will be in San Diego at the Mortgage Banker Association’s Reverse Mortgage Conference. Follow us on Twitter at www.twitter.com/hecmgirl for tweets from the conference, and hopefully we will be able to treat you to a few interviews next week.

I look forward to seeing some of you in California!

Foreclosures Affect Animals as Well as People

The media has recently been full of stories about homeowners losing their homes to foreclosure, but there is a side that has received relatively less exposure: the effects foreclosure has had on many pets.

While a story in the Chicago Tribune several months ago discussed a pet food pantry that was helping homeowners who could no longer afford to look after their pets, a sadder tale is emerging in Arizona. As the two co-owners of Robin Hood Animal Rescue face foreclosure, 70 cats and dogs are at risk of being euthanized. Some of the animals have special needs (as is the case in most animal shelters), and the shelter has housed some of the animals for four or five years.

There is a lot of irony in an animal rescue shelter needing rescuing itself, but after so many years of speaking out against euthanizing unwanted animals, the shelter is now the one in need of rescuing. The heartbreaking story can be found at abc15.com. Those wishing to help can also visit Robin Hood Animal Rescue’s website.

Taking in a Renter to Help Pay the Mortgage or Increase Income

An article in the Wall Street Journal today focused on a noteworthy new phenomenon: more homeowners are taking in renters. In some cases, homeowners are taking in renters in homes they still live in as a way to help make ends meet. In others, homeowners are becoming landlords, renting out homes they are unable to sell. This seems to be a popular option when the homeowners are forced to make a quick move- especially in the distressed real estate market. While to qualify for a reverse mortgage, a single family residence cannot be a rental property, nor can any portion of it be a rental property, renting out a home may be a good option for those who do not qualify for a reverse mortgage, but need the income from their home. In addition, multi-family homes with separate apartments may be rented and still qualify for a reverse mortgage as long as the homeowner continues to occupy the home.

There are some additional costs that come with being a landlord. Landlord insurance is about 25% higher than homeowners insurance, and landlords who use property manages may wind up paying them 3-12% of the rent. However, a tenant can be a good source of income, helping homeowners be able to continue to afford mortgage payments or break even on a property. When homeowners need to relocate in a short time frame, taking on a tenant helps alleviate the financial burden of paying for two mortgages at once (or a mortgage and rent).

Breaking News: FHA Implements New HECM Counseling Standards and Protocol

The FHA released a final rule today that made the new HECM counseling standards official. The rule goes into effect on October 2, 2009.

Among the new standards, the rule establishes standards for certification testing for HECM counselors and a national Roster of HECM counselors. The final rule establishes that:

1. HECM counselors who have passed the exam by October 2, 2009 will be automatically included in the HECM counselors Roster.

2. HECM counselors who have been removed for the Roster may apply for reinstatement by explaining in writing how the deficiencies that were the cause of their removal have been addressed and how their program has been improved so as to warrant reinstatement of the counselor.

3. To be eligible for the HECM counselor Roster, counselors must not be listed on any of the following lists: General Services Administration’s Suspension and Debarment List, HUD’s Limited Denial of Participation List, or HUD’s Credit Alert Interactive Response System.

4. Counselors have a 30 day period to submit a written appeal of their proposed removal from the Roster.

5. A counselor may be removed for a maximum period of one year.

Counselors will be tested every 3 years to remain on the Roster and must complete continuing education requirements.

The final ruling can be read in its entirety as it appears in the Federal Register. Hopefully the ruling will help improve the HECM counseling process.

UPDATE: The FHA HECM counseling protocols have yet to be released. An update will go out when it is published. The Final Rule published today only covers the HECM counseling Roster and the standards that accompany it.

Pending Home Sales Improve in July

Pending home sales improved for the sixth straight month in July to a level of 97.6 on the National Association of Realtors (NAR) index. While the index has improved dramatically from January, when it was around 80, levels still are nowhere near what they were during the housing bubble. In 2005, the pending home sales index neared 130.

Although pending home sales have increased, some of the factors behind the increase include falling home prices, low mortgage rates and the Obama administration’s $8,000 tax credit for first-time home buyers. But with the tax credit expiring towards the end of the year and home prices beginning to go back up (or decrease less rapidly), some question whether the rise in pending home sales will be sustainable.

(Reference: The Wall Street Journal print edition)

Prices Slide Even in America’s Most Expensive Zip Codes

An article on Forbes revealed today that even within the Forbes list of America’s 500 Most Expensive Zip Codes, home prices have taken a large hit in the past year. The top 3 zip codes on the list experienced declines of 23%, 23% and 24% respectively. The list as a whole saw a 7% drop on average.

But one of the things that is interesting about the list is that prices were not necessarily being pulled down by foreclosures. Several zip codes (in Atherton, CA, Hastings-on-Hudson, NY and East Hampton, NY) were used as examples of places where prices have dropped significantly without homes being in foreclosure. No homes are in foreclosure in Hastings-on-Hudson, yet prices have dropped 9%. In Atherton, only 10 homes are in foreclosure with prices dropping 23%. Rather, it appears the glut of homes on the market has helped to drive prices down. In East Hampton, at the current rate, it would take 25 years before all the homes currently on the market are sold. This cannot help but have an affect on home prices.

The five most expensive zip codes in America:

1. Alpine, NJ ($4,139,041)

2. Atherton, CA ($3,849,133)

3. New York, NY ($3,521,514)

4. Duarte, CA ($3,444,773)

5. Beverly Hills, CA ($3,367,167)

This Week’s Reverse Mortgage Rates: September 1, 2009

This week’s reverse mortgage rates are below. The rates are effective for the week beginning September 1, 2009. The HECM CMT will no longer be offered.

APR:

HECM LIBOR 225: 2.509

HECM LIBOR 250: 2.759

HECM LIBOR 275: 3.009

HECM LIBOR 300: 3.259

Expected Rates:

HECM LIBOR 225: 5.98

HECM LIBOR 250: 6.23

HECM LIBOR 275: 6.48

HECM LIBOR 300: 6.73

The rates for the HECM LIBOR this week remained almost the same as last week, rising by one hundredth of a point. As the HECM CMT will no longer be offered, we will no longer report its rates.

Good News For the Housing Market

There was some good news for the housing market this week. New home sales increased more than expected in July, up 9.6 percent from June, and at the highest levels since September of 2008. Sales were up to 433,000 versus the 395,000 adjusted figure from June. Analysts, meanwhile, were only expecting sales to increase to 390,000 from the originally reported 384,000 in June. However, new home sales are still down 13.4% from a year ago. Most of the increase appears to be attributed to the Northeast, with a 32.4% increase in July, and the South, with a 16.2% increase.

The Standard & Poor’s Case-Schiller index posted its first quarter over quarter increase in three years, rising 2.9 percent in the second quarter compared to the first. The price index fell 15.4% in June, compared to a revised 17% drop in May, indicating that the rate of decline in home prices appears to be slowing.

Google To Begin Offering Mortgage Quotes Online?

Speculation is increasing that Google will begin offering mortgage quotes online as early as this month. The service is rumored to resemble that offered by Lending Tree, which allows borrowers to quickly receive quotes and compare offers from a variety of mortgage companies. The buzz has begun due to a lawsuit filed by Lending Tree against Mortech. Lending Tree alleges Mortech has agreed to make its technology available to Google, allowing Google to launch this product in competition with Lending Tree, which is a violation of the contract between Lending Tree and Mortech.

It remains to be seen whether or not reverse mortgages will be affected by or included in Google’s new product. However, Google offering mortgage quotes would likely have an affect on the mortgage industry due to Google’s large market share.