NAHB updates on mortgages

May 24, 2010

Fannie Mae Tightens Lending Standards, Helps Distressed Home Owners

Tightened Lending Standards
In an effort to return to more prudent underwriting, Fannie Mae has announced that it is tightening lending standards for adjustable rate and interest-only mortgages. Starting on June 19, home buyers who acquire an ARM with an initial fixed-rate period of five years or less will have to qualify at the note rate plus 2% or at the fully indexed rate. Because few consumers are choosing ARMs in the current market, the immediate impact of this change should not be substantial; however, ARMS will become more popular as interest rate levels increase. As for interest-only mortgages, Fannie Mae is structuring this option for borrowers who are in a position to choose it as a financial management tool rather than as a tool to make their monthly payments more affordable. To be eligible for interest-only loans, borrowers must demonstrate the ability to qualify for the loan when the interest-only feature ends and the payment is based on principal and interest. The borrower must also have a credit score of at least 720 and have 24 months of reserves at a minimum. Meanwhile, Fannie Mae has also announced the retirement of seven-year balloon mortgages as a standard mortgage product. More information is available in Nation's Building News.


Helping Distressed Home Owners Reenter the Housing Market
In separate news, Fannie Mae is making it easier for distressed borrowers to purchase new homes in the future. Changes described in its Announcement SEL-2010-05 are designed to reward owners who worked with their loan servicers when they experienced difficulty repaying their mortgage debt. Under Fannie's new policies, home owners who avoided foreclosure by exercising pre-foreclosure solutions such as a deed-in-lieu of foreclosure, short sale or pre-foreclosure sale will not have to wait so long to qualify for a mortgage to buy another home. For example, after a deed-in-lieu of foreclosure, home owners currently have to wait four years, but the new policies allow those who make a downpayment of 20% to get back in the housing market within just two years; under extenuating circumstances, such as the loss of a job, they will only have to put 10% down. Fannie Mae says these changes are aimed at addressing the needs of the housing market following the recession. The moves should also help home builders, mortgage lenders and Realtors by contributing to the ongoing housing recovery. For more information on either of the above items, please contact Steve Linville at 800-368-5242, x8597.

P.S. If you are getting serious about building a home, it's time to talk to our sister company Green Pointe Homes. Affordable newly built homes in Northwest Indiana starting under $200,000 right now! Call today. 219-465-8352 Steve Dalton

Chesterton Indiana - Coffee Creek

The coffee creek saga (read the rest here - this is only a partial post from Northwest Indiana Politics)

In what has become the longest running slow motion car crash in Northwest Indiana developments, once again coffee creek in Chesterton is in the news. The Times reports that a bank is Illinois is owed $12 million by the developers and is suing for default.

I have some personal experience with this development, and a whole lot of dismay that a terrific idea has been so thoroughly destroyed by small minded and petty leaders. Some highlights, and feel free to add your own recollections:

• Sand Creek was originally the private course for one of the steel mills, I think US Steel
• Sand Creek was at some point developed for housing, and things went bad back in the 80's
  
• Sand Creek was sold off to NIPSCO under a for profit non regulated unit called Lake Eerie Land Company. The realtors who were marketing the site were essentially pulled in house and Lake Eerie Land began purchasing more land adjacent.
• In the mid-90's a movement which is alternately called neo-urbanism or new urbanism rose up, and Lake Eerie Land designed a substantial project adjacent to Sand Creek Country Club which would feature a downtown, lifestyle mall, hundreds of homes, and live work style community. Coffee Creek would eventually win numerous national awards for planning and design, but the market in NW Indiana wasn't quite ready.
• Local home builders were always thought to be too small and too normal, so they were overlooked and under-utilized, the Coffee Creek marketers kept thinking that it was going to have to be a big builder or group from Chicago. One entire section of Coffee Creek was sold to the Carpenters Union as a fully developed neighborhood investment, for roughly 5 times its actual value and it was actually never fully developed.
  
• Ultimately it became whispered knowledge that the realtors, now in house, for Coffee Creek paid some incentives to get the Carpenters Union to buy this bad investment, and some of these guys ultimately went to jail. Still the project sat with roughly a dozen homes on 1,000 acres. No retail, no lifestyle center, no neo-urbanism.

Continued on Northwest Indiana - Porter County Politics

Real Estate in Indiana - Mortgages

Wow, I was wrong on mortgage interest rates. I really felt we'd be running closer to 6% on rates by now, and we're actually looking at cracking 5% again today! Why?

• One of my favorites, the markets believe that conservative politicians that are winning in primaries in the US this year will begin to roll back the massive levels of debt being sponsored by the Obama administration
• Europe borrowed their way all the way to bankruptcy, especially in Greece and possibly Ireland. As Europe begins the process of cutting the size of government, and bailing out these nations, we are getting the benefit of "flight to quality" investors here in the US.
• Real Estate is actually recovering, which should be pushing rates up, but the markets are so worried about a double dip that inflation fears are staying in the background.

This all adds up to some seriously low interest rates, at the same time that the real estate market here in Northwest Indiana is really starting to hum along. I put my own house on the market (7,000 sq feet and $650,000 for anyone interested) ... and believe it will sell pretty quickly.

P.S. The Matt Evans Team is handling my listing - my wife Julie works with Matt at Keller Williams Real Estate here's Matt's webpage: Matt Evans Team Valparaiso Real Estate

Julie's Webpage for your next listing: Julie Dalton Professional Real Estate in Northwest Indiana

All the talk - election fever in Indiana

Ok, so maybe you've been more concerned about the our economic recovery this spring ... or perhaps keeping an eye on the steel business since so much of Northwest Indiana is tied to their success.

But today the talk and buzz online is the primary election in Northwest Indiana. Our affiliated site Northwest Indiana Politics (aka Porter County Politics in the old days) is covering breaking news today live. Join us there and come back here tomorrow for news on mortgage rates and housing sales.