Goodbye subprime, hello FHA

BOSTON (CNNMoney.com) -- If your credit is weak or your savings anemic, here are two phrases you're likely to hear from mortgage loan officers in the next few years: FHA and mortgage insurance.

They're part of a back-to-basics theme that was emphasized Monday at the annual conference of the Mortgage Bankers Association in Boston.

For those who entered the business in the past five years, they've only known the good times and will need to be re-educated, said Paul Bibb, CEO of National City Mortgage, who was on a panel of leading mortgage industry executives.

"You probably have a lot of loan officers who can't spell FHA," said Bibb.

Bibb and David Lowman, CEO of Chase's Global Mortgage, which is a top 10 originator and servicer, said that during the go-go days of the housing boom, loan officers would steer home buyers with weak credit to subprime loans. And they would advise them to finance part of their down payment with a home equity loan.

"We probably all wish we had trained our sales staff to sell mortgage insurance," Lowman said. "The reason we're in this crisis is that we got away from the basics."

Now with the subprime market eviscerated, loan officers will be steering more borrowers with weak credit to loans insured by the Federal Housing Administration and advising those with little savings to get private mortgage insurance in cases where they can't put down 20 percent.

The FHA program is intended for home buyers and homeowners with weak credit. Borrowers with FHA-insured loans - which they get from private lenders as they would any other mortgage - pay a small premium to the FHA every month.

The FHA, in turn, uses those premiums to cover the lender in the event of foreclosure and requires lenders to pursue viable ways to help borrowers avoid foreclosure if they become delinquent.

Bibb can remember a time when FHA loans made up 30 percent of National City Mortgage's business. A few years ago, however, FHA loans had shrunk to about 3 percent of the business. Now, he said, they currently account for as much as 12 percent.

The call to go back to basics comes amid a sobering forecast for home price growth. Patricia Cook, executive vice president and chief business officer of Freddie Mac, who was also speaking on the MBA panel, expects price declines on a nationwide basis this year and next and then only a slow recovery thereafter.

Some markets are holding up and will continue to do so, Bibb said. But he's less optimistic for markets such as Arizona and Nevada where home-price gains were driven by heavy speculation. "[In those markets] the correction could be quite severe and last into 2009, if not 2010," Bibb said.

Lawmakers have been working on legislation to reform the FHA to modernize its standards so that they reflect changes to the housing market in the past 30 years. Among the changes on tap, lawmakers want to:

Raise loan limits. Today the FHA won't insure loans above $362,790 for single-family homes, and even less in lower-cost areas. Lawmakers are considering raising that ceiling to at least 100 percent of the conforming loan limit for mortgages backed by Fannie Mae and Freddie Mac, currently $417,000.

Reduce down payment requirements. Homeowners would no longer be required to have 3 percent equity or the cash equivalent. They could get an FHA-insured loan with 0 percent down.

Reduce complexity. Lenders have been complaining about the time and expense it takes to make an FHA loan.

Separately, the Department of Housing and Urban Development, which oversees FHA, may move to introduce risk-based pricing. Riskier borrowers would have to pay higher premiums than less risky borrowers. Top of page

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source: cnn.com

Sweetening Home Sales By Offering Selling Incentives

These days, a real-estate agent's paycheck doesn't necessarily stop at a cut of the commission.

In markets with a glut of homes for sale -- and there are many of them -- sellers are in fierce competition, all hoping to lure buyers to their properties for a showing. Some of them are making appeals to the pocketbooks of agents working with the buyers. And a buyer might never know about that added bonus.

"With the market shifting from a seller's market to much more of a buyer's market, those incentives are increasing," says Leslie Tyler, vice president of marketing for ZipRealty, a real-estate brokerage based in Emeryville, Calif.

Mentions of cash bonuses, gift cards and other incentives can be emailed to agents, or attached to some listings -- information that real-estate agents can see through professional services but that buyers don't have access to on Web sites.

One builder, for example, recently offered a $5,000 American Express gift card to agents in exchange for a buyer who signed a contract on a Long Island City, N.Y., condominium, says Noah Freedman, a principal with the brokerage firm Bond New York Real Estate.

Keys to a BMW

During the last year, the agent who brought in a buyer for a penthouse in a financial-district building in New York City was promised a fully paid lease on a BMW for a set period of time, he adds.

The main advantage of these incentives: They often catch the eyes of real-estate agents, attracting attention to one property in a sea of available homes, Mr. Freedman says. Whether they have that much influence on a sale, however, isn't as clear. "You can't make someone buy something because you're going to get an AmEx card," Mr. Freedman says.

As for sellers considering the incentive tactic, try to find out what other sellers in the area are offering in terms of bonuses and commission share, Ms. Tyler says. A seller might ask brokers about perks other sellers are offering. However, some might decide it's a better move to appeal to the buyer's pocketbook by agreeing to cover closing costs or cutting the sale price.

Ethics of Choice

Real-estate agents do have a responsibility to show buyers the homes that best suit their needs, says Michael Thiel, associate counsel for the National Association of Realtors. And while perks may be nice, "the obligation to the client is primary."

But in general, agents are not obliged to disclose whether they get bonus compensation on a particular home, Mr. Thiel says.

The incentive could be influential when two similar homes are available -- and one of them offers a perk to the agent, he says. In such a case, an agent might show the property with the incentive first. But if agents get greedy and only show homes that would give them a bigger payday, there's a risk of losing the client.

Given the amount of information available to buyers via the Internet, savvy consumers know what properties are out there -- and decide whether they're being shown all of what fits their needs, says Phyllis Pezenik, vice president of sales and leasing for DJK Residential, a New York real-estate firm.

"If a buyer becomes aware of another property that is similar or better...and the agent has not told them about it, that would tend to make them wary of that broker," she says.

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source: realestatejournal.com

'Lost' Regular Lists House in Oahu

ABC's agreement to trim back and set an ending date for its hit series "Lost" is one of the reasons show regular Terry O'Quinn has placed his Oahu house on the market for nearly $3 million.

The plot-twisting series, set among plane-crash castaways, films in Oahu for much of the year. ABC said in May that it would cut back to 16 episodes a season from more than 20. The 55-year-old Mr. O'Quinn, who won an Emmy last month for his role as the slightly unhinged John Locke, said that his wife, Lori, wants to spend more time in California, and that the shortened filming season has made such a change easier.

Two years ago, the couple paid just over $2 million for the 1.17-acre property on Oahu's North Shore and have done some landscaping. There's a four-bedroom main house and a guest house (about 5,400 square feet in all) as well as a pool, spa and gated entrances. Curtis Jackson of Mary Worrall Associates, Sotheby's International Realty, has the listing.

Mr. O'Quinn plans to work on the series until it ends in 2010 and will rent an Oahu home. "Unless they kill me off, I'm here for two more years," he said. "I love this job."

Condo's Price Jumps at Time Warner Center

The Manhattan condo that Latin pop star Ricky Martin sold last year for $9.75 million is back on the market -- at nearly twice the price.

The approximately 3,050-square-foot apartment, on the 65th floor of the Time Warner Center, is listed at $18.9 million. The triangular southeast-corner condo, in one of the twin glass high-rises overlooking Central Park, has seven rooms and river views as well, and includes a new automated lighting and window-treatment system.

It first traded hands in 2004, when Mr. Martin bought it from the developer at about $6.8 million. Brown Harris Stevens's Elizabeth Lee Sample, one of the apartment's listing agents, said the apartment's current owner is an art collector, but wouldn't elaborate. (Brown Harris's Brenda Powers also has the listing.) Mr. Martin recently bought an apartment for $6.3 million in 40 Bond, a downtown-Manhattan project of hotelier Ian Schrager. In April, Mr. Martin paid $16.25 million for a home in Golden Beach, Fla., north of Miami Beach, records show.

Neighbors in the Time Warner towers include British investor David Martinez, who paid nearly $55 million for two full penthouse floors. Mr. Martinez is making parts of his apartment double-height, at an estimated cost of $15 million, a person familiar with the home says.

Ranch Where Ads Rolled Is Auctioned

After more than 10 years on and off the market, Colorado's Last Dollar Ranch, a site of ads for Marlboro, Budweiser and others, sold yesterday for $6.27 million.

The seller, Vince Kontny, former president and chief operating officer of construction concern Fluor Corp., last asked $12 million for the ranch in 2006. Randy Lewis of San Antonio bought the roughly 400-acre property, outside Telluride, at an auction in Montrose, Colo., yesterday, according to J.P. King Auction Co.

Besides ads for the cigarette, the ranch also was the place where Budweiser Clydesdales had a snowball fight in a well-known ad from the 2005 Super Bowl. The property includes a cattle operation and a 1,200-square-foot Victorian house. There are also nine log cabins, a guest cabin and a new barn.

Mr. Kontny, 70, and his wife, Joan, bought the ranch in 1989 and extensively restored it over five years. They placed a conservation easement on the property in the 1990s limiting further development. People in the industry say the restrictions are mainly responsible for the property's long wait on the market.

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source: realestatejournal.com

How Housing Turmoil Could Hurt Republicans in '08

The housing crunch is most severe in some of the most hotly contested political battleground states, a trend that could spell trouble for Republicans next year.

Six of the 10 states with the highest foreclosure rates in the country last month are considered by leaders of both parties to be swing states. They include the two biggest prizes of the past two presidential campaigns: Florida, which came in No. 2 on the list, with one foreclosure filing for every 248 households in September; and Ohio, No. 7, with one foreclosure for every 319 households, according to a survey by RealtyTrac Inc., a California property-research company.

Ohio's industrial neighbor Michigan ranked No. 4 in foreclosure rates. Three Western battleground states -- Nevada (No. 1), Arizona (No. 5) and Colorado (No. 8) -- also make the list. President Bush carried all but one of those states in 2000 and 2004. The exception: Michigan, where he lost both times, but campaigned intensively.

The rash of foreclosures in the Rust Belt and the Sun Belt is almost certain to gain velocity, housing experts said. If housing issues become prominent in those states in campaigning for next year's elections, it is likely to hurt Republicans, because they control the White House, and the party's presidential candidates have been more hesitant than Democrats to address the issue.

"For better or worse, as the incumbent party, Republicans own the economy," ISI Group Inc., a stock brokerage that specializes in policy research, said in a recent report. "Therefore, falling home prices, particularly if they lead to broader economic woes, will hurt Republican prospects for maintaining the White House and picking up seats in Congress."

In the Republican presidential candidates' first debate focused on economic issues last week, none raised housing concerns.

One reason for Republican silence may be that, for all the headlines about a housing crunch, the issue doesn't rank high in national polls. In an early September Wall Street Journal/NBC News poll, when people were asked to name two items that should be "the top priorities for President Bush to address," 7% cited "the home-mortgage and housing markets."

Many states that may wield outsize influence on the 2008 presidential race saw a surge in subprime-mortgage lending, which helped fuel rising real-estate values and homeownership rates and now is spreading financial misery. From 2004 to 2006, lenders made $292 billion in high-interest-rate home loans in Florida, Ohio, Nevada, Arizona and Colorado, according to an analysis by The Wall Street Journal of data filed with federal regulators. That was about 20% of all high-rate loans in the U.S. Most home loans carrying high rates are considered to be subprime -- extended to borrowers with sketchy credit or stretched finances.

Florida, Arizona and Nevada rank among the top five states in the growth of high-rate loans as a percentage of all home loans between 2004 and 2006. That suggests more possible political volatility since the increases are likely to cause a harder fall as housing prices sputter and adjustable-rate mortgages reset to higher rates.

Politicians of both parties in many of those states are springing into action. In Florida, Republican Gov. Charlie Crist signed a bill making "predatory" lending a felony, while in Democratic-controlled Ohio, the housing authority put aside $100 million to help troubled homeowners refinance their properties. In Nevada, Republican Gov. Jim Gibbons succeeded in getting mortgage companies to revisit foreclosure cases.

In Washington, congressional Democrats have begun discussing legislation to help homeowners, most of it aimed at cracking down on unethical lenders, rather than aiding borrowers.

On the hustings, Democratic presidential candidates have seized on the issue. Former North Carolina Sen. John Edwards has called for a policy that bars many predatory-lending practices and would make it easier for homeowners to declare bankruptcy to save their homes. New York Sen. Hillary Clinton issued a detailed policy paper on subprime lending that would impose restrictions on lenders.

"We think it's going to be one of the hot topics of '08," said Justine Sessions, a spokeswoman for Sen. Christopher Dodd, a Democratic candidate for president. The Connecticut senator, who is chairman of the Banking Committee, has introduced a bill that, among other things, would place interest collars on mortgages, eliminate prepayment fees and bar mortgage brokers from steering consumers to high-cost loans, which often earn them higher fees.

Republican candidates have been more circumspect. "There are a lot of families that have been hurt," former Massachusetts Gov. Mitt Romney, a former private-equity executive, said during an interview on CNBC, adding that helping them would "require some very careful attention."

Many of Mr. Romney's fellow Republicans have been similarly vague. Former New York Mayor Rudy Giuliani said Washington should refrain from intervening in the crisis and called for "more transparency, more information" to aid consumers. Arizona Sen. John McCain, whose home state ranks fifth in per-capita foreclosure rates, has said he would offer targeted assistance to homeowners who were swindled by mortgage brokers, but is opposed to broad government intervention.

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source: realestatejournal.com

Real estate: Tucson's recent commercial sales and leases

• Frances C. Mayse recently leased 483 square feet at 7660 E. Broadway for a property management company. Bruce A. Suppes and David A. Volk of CB Richard Ellis negotiated the lease on behalf of the landlord, the Arizona State Retirement System.
• A Positive Cash Flow leased 1,400 square feet of office space at 526 E. Roger Road. Randee Turner of Bourn Partners represented the owner, and Brandon Rogers of CB Richard Ellis represented the tenant.

• Goldblatt Systems LLC leased 7,027 square feet of office space at 5151 E. Broadway from 5151 E. Broadway LLC. Phil Skillings and Michael Townsdin represented the landlord.
• Knight Piesold & Co. leased 2,647 square feet at 3860 S. Palo Verde Road from Palo Verde Trust Partners LLC. Robert Glaser and Paul Hooker of Picor Commercial Real Estate Services handled the transaction.
• Subway leased 1,365 square feet of retail space at the northeast corner of Tangerine Farms and Lon Adams roads from Gladden Farms Marketplace LLC. Aaron LaPrise and Brian Harpel of The Harpel Co. Inc. represented the landlord.
• Vanity Fair Outlet leased about 25,000 square feet at Interstate 19 and Ajo Way from Vintage Tucson One LLC. Aaron LaPrise and Brian Harpel of The Harpel Co. Inc. represented the landlord.
• Subway leased 1,320 square feet of retail space at Interstate 19 and Sahuarita Road from Rancho Sahuarita Commercial Ventures LLC. Aaron LaPrise and Brian Harpel of The Harpel Co.Inc. represented the landlord.
• Precision Personal Training has leased 2,158 square feet at 6383 E. Grant Road from EMET LLC. Nancy Gansline of Oxford Realty Advisors represented the tenant.
SALES.

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source: azstarnet.com