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Improvements to the mortgage application process will allow borrowers more time to understand the entire process with more visibility of actual related costs but may slow the closing process.

What You Need to Know About the New Mortgage Rules 

 By Marilyn Lewis ; October 2, 2015 

Applying for a home loan soon should get easier and less confusing. That is the goal, at least, of changes to the mortgage application process required by the 2010 Dodd-Frank banking reform act, which finally kick in Saturday.

Clearing up confusion

If you have taken out a mortgage, you know how confusing the process can be. The law has required lenders to reveal in writing the fine points of the loan. But the documents that must be used are hard to understand for anyone who’s not a lawyer or a real estate professional.

Timing has also been a problem. The final details of a mortgage typically have been dumped in borrowers’ laps along with the final loan papers, meaning that, typically, a borrower has to take in the costs and terms of their new mortgage only minutes before signing the papers that commit them to hundreds of thousands of dollars of debt.

Stories of confused borrowers signing complex, risky mortgages they didn’t understand were commonplace at the end of the housing bubble. Congress’ effort to correct that led to a number of changes, including those going into effect now.

Two new disclosure forms

Starting now, lenders will use two new forms to explain the details of their mortgages — a loan estimate (shown here at the CFPB), which must be given to a borrower no later than the third business day after the borrower applies, and a final closing disclosure, which borrowers will receive three business days before a mortgage deal closes.
The two forms look similar, which should help borrowers line up the lender’s initial offer with the final deal, better revealing any bait-and-switch discrepancies in fees, rates or settlement costs.

More time to review the purchase

 

Lenders now will need to give borrowers the closing disclosure form breaking down the final costs and loan details at least three business days before the mortgage papers are signed.

This will give borrowers the time necessary to:

• Understand all of the loan’s terms and costs.
• Compare the final product with the offer they received initially.
• Ask questions about points of confusion.
• Enlist help from a lawyer, trusted friend or family member.
• Think about whether they can truly afford the mortgage they are considering and — if not — back out.

Brace for a rocky start

Lenders will need time to adapt to the changes, experts said. Expect that the process may be bumpy at first, said Tammy Felenstein, executive director of sales for Halstead Property in Stamford, Connecticut, talking to The New York Times. She advises borrowers to ask their real estate agents or an attorney for guidance. “Go with a lending institution that has prepared for these changes and knows what they’re doing,” she said.

The process is likely to create longer closing times. Borrowers can keep things moving by organizing their documents early, turning them into the lender quickly and scheduling inspections immediately, advises Diane Evans, the president of the American Land Title Association, in an interview with The Times:

Some real estate agents are planning to write contracts with 45-day closings, instead of 30, Ms. Evans said, adding, “if you’re prepared for a little more time and it takes less, everybody leaves a little happier.”

Source: http://www.msn.com/en-us/money/realestate/what-you-need-to-know-about-the-new-mortgage-rules/ar-AAf2o3n

 

 

 

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Home prices all time high up 5.5%. Los Angeles County's median home price is $492,000 with sales up 13.5% from a year ago. Most economists still predict continued appreciation but at a slower pace due to the increased cost of housing.

Southland home sales hit a nine-year high; prices up 5.5%

By Andrew Khouri - August 18, 2015

The Southern California housing market is enjoying a summer almost as hot as the weather.

Home sales reached a nine-year high in July, while the median price climbed 5.5% from a year earlier, according a report out Tuesday from CoreLogic.

The data represent a housing market that's picked up steam from a sluggish 2014, as an improved economy gives more families the confidence to buy a home. June sales also were at a nine-year high.

"Much of today's demand stems from job growth, low mortgage rates and a more confident consumer," CoreLogic analyst Andrew LePage said.

The 16.9% increase in sales from July 2014 comes as investors pull back from the marketplace, leaving more breathing room for families.

In July, absentee buyers, who are mostly investors, bought 21% of all homes sold, the smallest share since June 2010. All-cash transactions, often the sign of an investment deal, also fell to 21.7% of sales, the lowest since November 2008.

Real estate agents say some families have jumped into the market given all the talk about a coming rise in interest rates if the Federal Reserve raises its short-term benchmark rate later this year, as expected.

The robust demand pushed sales up in six Southland counties: Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura.

In Los Angeles County, sales jumped 13.5% from a year earlier. The median price, the point where half the homes sold for more and half for less, rose 4.7% to $492,000. In Orange County, sales were up 15.5% and prices increased 5.3% to $615,000.

The six-county region's median price ticked down 0.9% from June to $438,000. But LePage said such a month-to-month dip is not unusual and probably represents a shift in the mix of homes selling.

Most economists predict continued price appreciation ahead, though at a slower pace than in recent years as families struggle to afford the increased cost of housing. The California Assn. of Realtors expects that by the end of December the median price for a California single-family home will have risen 5.3% in 2015.

Source: http://www.latimes.com/business/realestate/la-fi-july-home-prices-20150819-story.html

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The jumbo loans market is getting bigger with some banks only requiring a 15% down payment for jumbo loans up to $1.5 million.  It's been a 58 percent increase in new loan originations from a year ago and an area of the mortgage market that has recovered more than any other sector since the housing crisis.

Banks Are Loosening Up on Jumbo Loans

Daily Real Estate News | Thursday, August 06, 2015 

 

As lenders try to capture more of the high-end housing market, J.P. Morgan Chase announced that it's loosening the underwriting standards for issuing jumbo mortgages, those that exceed $417,000 in most parts of the country or $625,500 in pricier areas. The bank is lowering its minimum credit score and down payment requirements for mortgages up to $3 million.

Chase's decision follows similar steps from Bank of America Corp., Wells Fargo, and other banks for jumbo mortgage requirements.

As such, the jumbo market is getting bigger. Jumbo originations in the second quarter climbed to an eight-year high of $93 billion – a 58 percent increase from a year ago, according to Inside Mortgage Finance estimates. Jumbo mortgages issued by lenders last year accounted for about 20 percent of all first-lien mortgages, up from 5.5 percent in 2009.

"There's no question that the jumbo market has probably recovered more than any sector of the mortgage market since the housing crisis," says Guy Cecala, publisher of Inside Mortgage Finance.
J.P. Morgan plans to lower its minimum FICO credit scores for jumbo mortgages from 740 to 680 for loans on primary single-family purchases, second homes, and some refinances. The bank is also allowing a 15 percent down payment for loans up to $3 million. That is less than other banks such as Bank of America and PNC Financial Services Group Inc. which allow a 15 percent down payment for jumbo loans up to $1 million and $1.5 million, respectively.

The housing recovery has been strong in the higher-priced tier. Existing single-family home sales priced between $750,000 and $1 million rose 21 percent in June from a year prior, according to the National Association of REALTORS®. Meanwhile, sales of homes priced between $100,000 and $250,000 rose 12.5 percent. Homes priced lower saw sales fall 3 percent.

Source: http://realtormag.realtor.org/daily-news/2015/08/06/banks-are-loosening-up-jumbo-loans

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That's good news as it's easier to qualify for a conforming loan than a jumbo loan. Also, jumbo loans due to higher loan amount comes with a higher price tag on the interest rate. If baseline jumbo thresholds rise more it should encourage more to buy and move into higher priced homes.

Mortgage Limits May Increase

With home prices still climbing, baseline jumbo-mortgage thresholds may be raised for the first time in a decade.

 

By Anya Martin -July 15, 2015 10:22 a.m. ET

 

Jumbo mortgages for single-family residences exceed $417,000 in most parts of the country and $625,500 in high-price markets. But with home prices climbing back to prerecession peaks in some markets, baseline jumbo thresholds may be raised for the first time in a decade.

 

The agency that sets these limits, the Federal Housing Finance Agency (FHFA), in May requested public input on its house price index. This index includes sale-price information on government-backed mortgages as well as real-estate sales compiled by research firm CoreLogic from hundreds of U.S. counties. Distressed sales are included but not appraisal values from refinances.

 

The deadline for input is July 27, and the FHFA will decide this fall whether to change the baseline limit starting Jan. 1.

In the early 1970s, the baseline limit for conventional loans was just $33,000. That was the maximum amount a homeowner could borrow to qualify for a “conforming” mortgage—one financed by Fannie Mae or Freddie Mac. The $33,000 limit rose steadily over the years to keep up with home prices. Hawaii, Alaska, Guam and the Virgin Islands got higher loan limits because of the high cost of living.

The Housing and Economic Recovery Act of 2008 established the current formula, which is based on median home-sale prices reported in a monthly FHFA survey. However, there is some wiggle room in high-cost areas, where conforming loans can exceed the baseline by up to 150%. 

To keep up with rapidly rising home prices, FHFA in January raised its conforming-loan cap in 46 counties nationwide—the largest number since 2012. Areas affected include metro Baltimore, Boston, Denver, Nashville and Seattle.

Loan-limit increases encourage more high-end home sales because many people, especially those upgrading for the first time to a pricier home, are more comfortable with a conforming loan, says Allen Decuyper, an agent with Nashville-based Neal Clayton Realtors. “For some it’s a psychological hurdle to get over—just the word ‘jumbo’—so [raising the limit] helps,” he adds.

Typically, it’s also easier to qualify for a conforming loan than a jumbo loan. Mortgages backed by Fannie Mae and Freddie Mac usually have lower interest rates, with the current difference about a quarter to a half a percentage point below jumbo rates, says Norman Koenigsberg, president and CEO of East Brunswick, N.J.-based First Choice Loan Service. Conforming mortgages also have less stringent underwriting qualifications than jumbo loans, says Mathew Carson, a mortgage broker with San Francisco-based First Capital Group.

For example, to qualify for the best rates, jumbo borrowers need a credit score of 740 or higher, while a Fannie Mae-backed mortgage borrower may only need 680, Mr. Koenigsberg says. Additionally Fannie Mae and Freddie Mac mortgages allow down payments as low as 3% and require zero to three months’ worth of cash reserves, as opposed to typically a 20% down payment and six months’ reserves to a year for a jumbo loan, Mr. Carson says.

More tips on qualifying for a conforming loan:

Put more down. If a borrower has sufficient assets, the easiest way to qualify for a conforming loan is to make a larger down payment or limit the amount of a refinance.

Double up. Many borrowers take out a home-equity loan or line of credit to fill the down payment gap. However, because second mortgages typically are adjustable-rate mortgages, consumers should not borrow more than they can pay off within the time period when low rates are locked in, Mr. Carson says.

Compare rates. During some weeks in 2014, average rates for both 30-year, fixed-rate loans and adjustable-rate jumbo mortgages dipped lower than conforming-loan rates. Even when average rates are higher, some lenders are competitive with their jumbo products when wooing borrowers with high credit scores, Mr. Koenigsberg.

CITY	Conforming loan limit	% of loans that were jumbos (2012)	% of loans that were jumbos (2015)	Change
Washington, D.C.	$625,500	7.0%	10.2%	46.3%
Tampa, Fla.	$417,000	2.0%	3.5%	77.7%
St. Louis	$417,000	1.8%	2.5%	39.6%
Seattle	$517,500	5.7%	11.3%	97.2%
San Francisco	$625,500	17.6%	38.2%	116.6%
San Diego	$562,350	11.4%	19.9%	74.9%
San Antonio	$417,000	1.8%	2.5%	37.3%
Sacramento, Calif.	$474,950	3.1%	7.6%	149.3%
Riverside, Calif.	$417,000	3.1%	7.8%	151.3%
Portland, Ore.	$417,000	4.2%	8.0%	89.0%

Pittsburgh	$417,000	1.1%	1.6%	46.4%
Phoenix	$417,000	4.0%	6.3%	58.5%
Philadelphia	$417,000	4.7%	6.0%	27.3%
New York	$625,500	7.1%	9.7%	36.6%
Minneapolis-St. Paul	$417,000	3.1%	5.3%	68.3%
Miami-Fort Lauderdale	$417,000	7.1%	10.9%	53.2%
Los Angeles	$625,500	11.9%	21.3%	78.5%
Houston	$417,000	3.0%	5.4%	82.0%
Detroit	$417,000	0.9%	1.9%	108.1%
Denver	$424,350	6.2%	11.2%	82.3%

Dallas-Fort Worth	$417,000	2.5%	4.0%	62.1%
Chicago	$417,000	4.5%	6.4%	42.2%
Boston	$517,500	11.8%	14.1%	19.9%
Baltimore	$517,500	3.8%	4.5%	16.5%
Atlanta	$417,000	2.8%	4.7%	68.5%

Source: http://www.wsj.com/articles/mortgage-limits-may-increase-1436970136


 

 

Silicon Beach is Officially Spreading to the Venice Boardwalk

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Tech businesses continue to spread and booting out other businesses in their path. A brand new 28,000 snazzy building is coming offering a huge office space on the Venice Boardwalk. 

Silicon Beach is Officially Spreading to the Venice Boardwalk

Thursday, June 25, 2015, by Bianca Barragan

The Silicon Beach effect is spreading through all of Venice like wildfire, with tech businesses flocking to the area and, in many cases, booting other businesses out so they can move in. On the Venice Boardwalk, the creep has been slow and steady: totally-not-just-for-sexting app Snapchat began in a rented former pot shop on the Boardwalk, then later moved into a spot in the Thornton Lofts (and with a bunch of other nearby locations). Now there's a possibility that an actual full-on, glassy office building could be coming to what's now a parking lot right on Ocean Front Walk, says Yo! Venice, and word is that there's already a tech tenant circling.

The plan calls for a snazzy, 28,000-square-foot structure that, from the available rendering, appears to be three stories tall. According to city planning documents, about 22,800 square feet of that would be offices, with about 5,200 square feet of retail space and one residential unit. There are also two levels of underground parking planned. The architect who designed the building, Venice-based Glen Irani, says there's an "active permit" for the site that allows a building of roughly the same size on the lot, but one that would be retail and restaurant space—more in line with what's already on the Boardwalk.
Irani says he told the owner that restaurants are gross and that an office would be better for the spot:

"It's an economically viable option, but certainly not the highest and best use nor the most neighborhood friendly use. Such a use would entail numerous deliveries every day, food trash odors, homeless lurking for food trash, constant vehicular traffic, and possibly a bar or two with loitering drunkards after-hours as most every bar does have," Irani says. It's rumored that there's already a tech tenant waiting in the wings for the office complex to be built (Yo! Venice suspects it's Snapchat, which is currently spread out across several locations that are close but not unified and seems constantly to be signing more and more leases.)

Neighbors who were present at a community meeting to discuss the potential development seemed mostly worried about the loss of the parking lot, which many of them actually use.

Source: http://la.curbed.com/archives/2015/06/silicon_beach_office_venice_boardwalk.php

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Howard Hughes Center mall on the Westside is getting a major makeover to meet the demands of the changing demographics of the area as thousands are moving into area of Playa Vista which is within walking distance. It will be another positive addition which was spurred in part by the purchasing power due to the proximity of both residents and employees who live and work in the area.

New owners plan $30-million face lift for Promenade at Howard Hughes Center

 

A rendering of the changes at the Promenade at Howard Hughes Center in Westchester. (Laurus Corp.)

By Roger Vincent - June 18, 2015

The Promenade at Howard Hughes Center, a prominent but dated mall next to the 405 Freeway in Westchester, has been sold to Los Angeles investors who plan to give it a $30-million face lift.

Laurus Corp., a real estate development firm that acquires and improves commercial properties, said it plans a greater emphasis on food and entertainment along with a more pedestrian-friendly layout. 

 

The mall, completed in 2001, was designed to serve customers arriving by car, but thousands of people have recently moved to the area and could visit on foot, the new owners said.

 

Howard Hughes Center, the neighborhood where the mall is located, has a collection of high-rise office buildings and a growing number of apartments. Soon it will have a total of 1.3 million square feet of office space and 3,200 apartments, said Jean Paul Szita, president of Laurus Corp.

The mall is also close to Playa Vista, an office, residential and retail development being built on land that once was home to the aviation empire of business mogul Howard Hughes.

The investment was spurred in part by "the purchasing power of the residents and employees who live and work in such close proximity," Szita said.

Laurus Corp. bought the mall from Passco Cos. last week. Terms of the sale were not disclosed, but real estate data provider CoStar Group Inc. valued it at about $100 million.

The mall's new design, by Los Angeles architect the Jerde Partnership Inc., calls for more indoor-outdoor uses such as courtyards with landscaping. The installation of south-facing escalators and a new pedestrian crossing on Center Drive aims to make the mall easy to access by pedestrians.

The courtyard adjacent to the Cinemark theater complex will become the new center of the mall, with a new outdoor screening area and fire pit, as well as new restaurants, an outdoor dining area and casual lounge space. The team will also update the current Art Deco retail facades throughout the center to reflect a more modern aesthetic.

The Playa Vista area is experiencing a growth boom. In recent years many technology and media firms that found themselves priced out of Santa Monica and other Westside office markets have gravitated to new and renovated buildings in Playa Vista.

Internet titan Google Inc. last year bought nearly 12 acres at Playa Vista that is zoned for new offices or studios. Google is also expected to lease the massive 1943 hangar where aviator Hughes built his "Spruce Goose" airplane. Yahoo Inc., another huge Internet company, said in January that it will move regional operations from Santa Monica to Playa Vista.

Landlord Laurus Corp. has more than $1 billion in assets under management and is affiliated with real estate private equity firm Ethika Investments.

Source: http://www.latimes.com/business/realestate/la-fi-promenade-mall-sale-20150619-story.html

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Real estate is stronger than ever so put the worries aside as another bubble is probably unlikely. There have been many changes since the last bubble in 2006 which eliminate the threat of a bubble like the last one. These factors are the following:

• Appraisals tend to err on the low side today, rather than on the high side as was the case during the bubble.
• Alternative documentation rules that allowed many borrowers to qualify without adequate financial capacity, are gone; full documentation is the rule.
• The private secondary market in mortgage-backed securities, which financed most of the sub-prime mortgages written during the bubble period, collapsed during the crisis and has barely begun to recover.

All these were important changes that make it fairly impossible to support another bubble as lessons have already been learned.

Is Another Housing Price Bubble Looming?

Jack M. Guttentag  Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania
Posted: 06/08/2015 6:13 pm EDT

The question is being asked with increasing frequency, and also with great anxiety. The last housing bubble led to a financial crisis followed by a recession.
Many of those commenting on the question, however, don't understand what a price bubble is. It is NOT a marked rise in prices. Sharp price increases are common, and pose no threat to the stability of the economy whereas price bubbles are rare and do pose a threat.

A price bubble is a rise in price based on the expectation that the price will rise. Sooner or later something happens to erode confidence in continued price increases, at which point the bubble bursts and prices drop. What makes it a price bubble is that the cause of the price increase is an expectation that the price will increase, which sooner or later must reverse itself.

Bubbles can only arise in markets where the stock of items is very large relative to new production. If a rise in price immediately stimulates an increase in supply, any bubble will quickly disappear.

Housing meets that condition because the stock of houses is large relative to new construction, but ocean liners have an even longer production cycle than houses, and to my knowledge that industry has never been hit by a price bubble. Something else must be involved and it is quite possible that there is no single explanation.

The expectations of price increases that drove the house price bubble of 2000-2006, which led to the financial crisis, was not limited to consumers looking to buy houses. It also engulfed the lenders who financed their house purchases, and the investors here and abroad who purchased the securities that were issued against home mortgage collateral. Indeed, they were the crucial players in the bubble.

Rising home prices convert virtually all mortgage loans, even those that violate the most sacrosanct underwriting rules, into good loans. For example:

• The borrower with an adjustable rate mortgage can't meet the new higher payment on the first rate adjustment date in two years. No problem, after two years of price increase, the house will then have enough equity to allow the lender to refinance the loan with a new lower payment.
• The borrower has no money for a down payment. No problem, after two years of five percent price increases, the borrower will have equity of more than 10 percent.
• The borrower is a poor credit risk with a high likelihood of defaulting. No problem if he defaults, the price increases will cover the foreclosure costs and we'll get our money back.

The presumption that house prices could only rise was supported by a long record of house price increases interrupted by only occasional declines in specific areas that were moderate and short-lived.

Prior to 2006, there had not been a national decline in house prices since the depression of the 1930s. The premise that this pattern would continue was entirely plausible -- so much so that it was generally accepted by regulators who did nothing to deflate the bubble. Wholesale acceptance by lenders, investors and regulators of the premise that house prices could only rise led to the bubble, which invalidated the premise when the bubble burst -- as all bubbles do.

House prices generally fell between 2006 and 2012, and have been on the rise since 2012, with the increases in some areas bringing prices above the highs reached in 2006. Reports of large price increases are now invariably accompanied by concerns about whether or not another bubble may be brewing.

My view is that we are a long way from another house price bubble. Home buyers, lenders, investors and regulators now understand that a nationwide decline in house prices is possible -- because we recently lived through one. Probably it will take another generation to forget what we learned.

Even if the lesson was forgotten tomorrow, changes that have occurred in the housing finance system as a result of the crisis and the recession would make it very difficult if not impossible for the system to support a bubble. Among the more important changes:

• Appraisals tend to err on the low side today, rather than on the high side as was the case during the bubble.
• Alternative documentation rules that allowed many borrowers to qualify without adequate financial capacity, are gone; full documentation is the rule.
• The private secondary market in mortgage-backed securities, which financed most of the sub-prime mortgages written during the bubble period, collapsed during the crisis and has barely begun to recover.

In many respects, these changes went too far and made the housing finance system less effective, but they did eliminate the threat of another housing bubble. I don't expect to see another one in my lifetime.

 

Source: http://www.huffingtonpost.com/jack-m-guttentag/is-another-housing-price_b_7539050.html