Foreclosures Fell in September

According to a new CNN article the number of foreclosures in September fell by 8%. CNN cites a recent RealtyTrac article that shows foreclosures falling. There are some questions as to whether this is a momentary lull or if it is the beginning of a trend out of the foreclosure doldrums. They also speculate whether the drop is due to potential foreclosure properties being bought or if the market is beginning to correct as defaults were down over 200,000 as well.

The Sun Belt and Rust Belt states were still among the hardest hit but even they are showing some improvement. Let's hope that this is a trend moving in the right direction. As more refinancing options are being made available we could see more and more consumers who were facing foreclosure able to pull themselves out of it. It is good news in the short terms but it needs to be watched closely to see if the improvements continue or if it was a momentary lag.

FHA to Implement New Refinancing Product

The latest news on the mortgage meltdown front comes from the federal government and the FHA. As many people know the FHA was established to assist first time and lower to middle income consumers in buying a home. The FHA has announced a new product called FHASecure, which is designed to help overburdened ARM borrowers with an opportunity to refinance and potentially avoid foreclosure. This news should help the improve the mortgage market as it will allow many homeowners refinance their current ARM loans to avoid default and foreclosure when they are unable to pay when their teaser rates expire. I will withhold judgment on this until I see how it is applied and whether homeowners are able to get out of trouble. This will not help everyone but if applied correctly it should help a considerable number of people.

Here are some of the highlights.

• Lower Down Payments. Authorizes zero and lower down payment loans for borrowers that can afford mortgage payments, but lack the cash for a required down payment.
  
• Housing Counseling. Authorizes more than double the current funding level for housing counseling, to help subprime homebuyers and borrowers late on mortgage loan payments.
  
• Subprime borrowers. Directs FHA to provide mortgage loans to higher risk (but qualified) borrowers, without authorizing unnecessary fee hikes on such borrowers.
  
• Reverse Mortgages. Enhances the FHA reverse mortgage loan program to help seniors pay for health and other expenses, by removing the loan cap to avoid program shutdowns, raising loan limits, and by reducing the maximum fee lenders can charge for these loans.
  
• Multifamily Loans. Raises FHA multifamily loan limits, so these loans can fully fund construction costs in high cost areas, and enhances sale of foreclosed FHA rental housing loans to localities, so that affordable housing can be maintained in local communities.
  
• Affordable Housing Fund. Authorizes up to $300 million a year from the bill’s excess profits for affordable housing, instead of returning such funds to the General Treasury.
• Higher Loan Limits. Adopts the Frank/Miller/Cardoza amendment that would raise FHA single family loan limits, which now bar loans above 95% of the median home price in each local area and shut FHA out of higher cost home markets. The amendment raises the FHA loan limit in each area to the lower of (a) 125% of the local area median home price or (b) 175% of the national GSE conforming loan limit. The amendment also retains the bill’s provision for a nationwide FHA loan floor of 65% of the GSE conforming loan limit, and gives HUD authority to raise these loan limit amounts by up to $100,000 “if market conditions warrant.”
  

One of the biggest changes is that the limit for FHA loans has been raised from $417,000 to over $600,000. IMO this is a good idea. While $400,000 in many areas of the country is a huge amount of money to those living in areas with high housing costs it is a welcomed change. In many parts of the country the average home is over $400,000 and because the FHA capped their limits in that range many first time and middle income homeowners were unable to get FHA loans. These people were either unable to buy their own homes or they had to get into risky financing situations to achieve the American Dream. With this increase many more middle income citizens will be able to buy a home through FHA and avoid more risky finance models. It will also help those who may have been unable to refinance with regular lenders and move into more consumer friendly FHA loans.

Again I will withhold judgment until I see some results but IMO this is a good thing and could help give the real estate and mortgage market a bit of a push in the other direction. And remember even if you are refinancing you are still required to get title insurance so make sure you shop around and find the best title company in terms of price and service.