Lately, sale agreements have been cancelled because the property appraised for less than the contract price. The buyer is unwilling or cannot put more money down for fear of overpaying in a percieved down market and the seller has already lost so much percieved value that the seller will not lower the price. The result is that the sale falls apart.

In some cases, the appraiser is not the cause. Fannie Mae and Freddie Mac purchase about half of all U.S. mortgages. If Fannie Mae, who buys the loans from the banks, finds banks are found guilty of price inflation, they force the banks to buy back the mortgage at a substantial cost. But if banks drop the appraisal value, they hope to avoid being accused or suspected of inflating the numbers.

Many lenders today will double-check an appraiser’s work by ordering a low-cost electronic valuation. These automated valuation systems only use public records and take no consideration to condition of the property and upgrades. If the electronic version is lower than the physical version, the banks will downgrade the true appraisal value to protect themselves. The result is that bank’s underwriters arbitrarily have been shaving value off the Buyer’s appraisal. At other times, the bank’s underwriters will ask the appraiser to explain the price difference, which can delay the closing.

Effective September 1st, banks selling their loans to Fannie Mae can no longer simply drop the appraisal value. In guidance issued June 30, Fannie Mae told it’s participating lenders that they must contact the appraiser to “resolve” disagreements. If that fails, banks must order a second appraisal and not rely on the automated software to determine the value. So now the banks cannot simply drop the original value that supports a sales contract.

There have been some upgrades to the Broward County Property Appraiser’s website. Effective October 1st, the site will show:

• Building permits are online
• Click on millage to see your city rates
• Explanations on Homestead
• The ability to search on sub-division sales

Concerning sub-division sales, only arms length transactions are included here. That means foreclosures are disqualified for comparables. “D” means dis-qualified and “Q” means qualified. Another update is that a short sale is now considered a qualified (at arm’s length) transaction.

Also added were more functionality on aerial views. Click on View Map. To the right by Details, you’ll see Pictometry. Click on it and you’ll see 45 degree aerial views of the property from north, south, east and west.

We are reverting back to stricter lending standards seen 20 years ago, as a result of the risky loans homebuyers took out to acquire properties they could otherwise not afford.  So this means new home buyers and those who choose to refinance should expect to pay a higher down payment and have a higher credit score than in the past.  The days of no document loans, asking for proof of employment and of income, are gone.

Even though the Federal Reserve has steadily cut rates to make it easier for borrowers to refinance their current interest-rate reset on their mortgages, there is still a reluctance to extend credit.  Companies that made second mortgages are now denying requests to take a secondary status in the event of a foreclosure, especially in markets that have been declining.  Conventional lenders have removed 30% to 40% of the borrowers who could have qualified in recent years. 

Call Courtney Silverman for home buying assistance in Broward County at 954-292-0743.

The Feds made another drop in short terms rates yesterday.  The Fed is desperately working to turn the nations economy around.  The threat of recession continues to be driven by the poor national housing market. 

Here in the Broward County markets of Fort Lauderdale, Weston, Davie and Plantation areas, we continue to have one of the best housing markets in the country.  It is not the market that we enjoyed 2 years ago, but homes are still selling that are priced properly in the market.  The average time on the market here is about 115 days.  Courtney Silverman’s inventory are on the market less than 68 days before receiving a contract.  There is around 18 months of total home inventory in the Fort Lauderdale, Weston, Davie and Plantation areas.  Home price are sliding slowly.

Now is a great time to buy residential real estate.

If you would like to get an idea on what your homes value currently is, visit the web site www.CourtneySilverman.com.  This site will allow you to enter in information on your home and then receive a market value analysis by e-mail.  It’s always a good idea to get an estimate of your homes value, whether you are planning to sell or not.

Have An Awesome Week!
Courtney Silverman

Why Don’t Mortgage Rates Drop When There Is A Cut In The Federal Funds Rate? Whenever the Fed cuts the federal funds rate, customers call mortgage lenders, eagerly expecting to take advantage of a drop in mortgage rates. By the time these phone calls are over, customers frequently feel disappointed and even suspicious. It just doesn’t seem right. Why would banks raise mortgage rates while the Federal Reserve is cutting rates? Believe it or not, there is zero causation between mortgage rates and the Federal Reserve reducing its target for the federal funds rate.

A look at mortgage rates must begin with a history lesson. From Jan. 3, 2001, to June 25, 2003, the Federal Reserve reduced its target for the federal funds rate 13 times. Here’s what happened to the average 30-year mortgage rate in the month after each cut: It fell eight times and rose five times.  It’s simply not true that a Fed rate cut automatically leads to a drop in fixed mortgage rates. Mortgage rates go up and down according to investors’ expectations of long-term inflation. Simply put: If investors think inflation will accelerate, mortgage rates (and other long-term interest rates) rise. The nation’s overall economy doesn’t appear to be in recession (although the housing sector, and some Midwestern states, might be). Yet the Federal Reserve added some stimulus by cutting the federal funds rate. That, in turn, could lead to faster-rising prices and, therefore, higher long-term interest rates. When you see mortgage rates declining, they’re reacting to market forces — and the Fed eventually plays catch-up.

HOW TO SELL YOUR HOME FOR TOP DOLLAR. If you are thinking about selling your house or condo, this is the best time of year to do so. However, a successful home sale requires preparation and planning.
 
 The first step is to get your residence into near “model home” condition. That means cleaning, repairing and painting. But don’t go overboard with renovations. Let your buyers remodel to their taste. Most home improvements rarely bring in as much in additional sales price as they cost.
 
 However, modest-cost cosmetic improvements usually pay off. Profitable examples include fresh paint inside and outside (paint is the most profitable dollar-for-dollar improvement you can make), new light fixtures, new floor coverings (if needed) such as wall-to-wall carpets, and outdoor landscaping spruce-up.
 
 THE BEST WAYS TO DETERMINE YOUR HOME’S MARKET VALUE. Home sales prices depend on recent sales prices of nearby comparable residences within the last few months. A good place to start is on the Internet to determine your home’s approximate market value.
 
 A brand-new Internet Web site that provides free “guesstimates” of home values is www.Zillow.com. When I checked my home, I was amazed to see an aerial photo of my house, including the lot boundaries. The Zillow estimate of my home’s market value was remarkably accurate. However, this remarkable new Web site doesn’t yet cover the entire nation.Another free Internet home-value-estimate Web sites include www.REALTOR.com  This Web site will often refer you to a local realty agent.
 
 After you have had fun with the Internet estimates of your home’s market value, if you are a serious home seller, the best way to obtain a more accurate market value estimate is to interview at least three successful local real estate sales agents.
 
 Even if you are thinking about selling your home alone (known as “FSBO - For Sale By Owner” or “fizzbo”) the agents you interview won’t mind giving you their listing presentations. The reason is they know most “for sale by owners” give up and list with a professional agent within 30 to 60 days.
 
 KEY QUESTIONS TO THE LISTING AGENT YOU INTERVIEW. The reason it is so important to interview your local agents is to understand their sales ability and their CMAs (comparative market analysis) of your home’s market value.
 
 The interview, including the agent’s inspection of your home, should take about an hour. This will be time well spent.
 
 The reason is that the agent should prepare a written CMA showing the agent’s estimate of your home’s market value. The CMA will include recent sales prices of comparable nearby homes, the asking prices of neighborhood homes now listed for sale (your competition), a list of recently expired nearby listings which didn’t sell, and the agent’s estimate of your home’s market value.
 
 In addition to receiving each interviewed agent’s CMA, here is a list of key questions to ask each agent (the best agents anticipate these questions as part of their listing presentations):
 
 1.) What are the names, addresses, and phones of your five most recent home sales listings?
 Before you decide to list with one of the agents interviewed, be sure to phone those recent sellers to ask, “Were you in any way unhappy with your listing agent?” and, “Would you list another home for sale with the same agent?”
 
 2.) How long have you been selling homes in this area? Do you sell real estate full-time? What professional courses and designations have you completed?
 
 Some agents will resent these questions, realizing you are a well-educated home seller. But the best agents will have anticipated these important questions.
 
 Occasionally, you will find a successful part-time agent who comes highly recommended by recent home sellers. Or you might encounter a promising new licensee who has lots of time to devote to selling your home listing.
 
 3.) What is your marketing plan for my home? The best agents will have anticipated this question by providing a written marketing plan as part of their listing presentation.
 
 Each written marketing plan should include at a minimum a) a weekday open house tour for all MLS (multiple listing service) member local agents, b) Internet promotion on the agent’s personal Web site and at www.REALTOR.com  (where 76 percent of today’s home buyers begin their search), c) brochures (ask to see samples of the agent’s past brochures for other listings).
 
 4.) How many listings do you have now? What are their addresses? Do you have an office assistant? What percentage of your listings didn’t sell last year? What day of the week do you take off and who covers for you when you are gone? Are you planning any vacations during the next three months?
 
 If the agent you are considering has too many listings, he or she might not be able to devote enough time to your home sale. Watch out for “numbers agents” who take many listings, have several assistants, but sell a low percentage of their listings. However, consider it a bonus if two agents work as a “team” to handle a large percentage of their listings.
 
 Having an office assistant is another bonus to free the agent’s time for sales while the assistant handles the details such as arranging inspections, appraisals, and sales closings.
 
 5.) What sales commission do you charge for a home like mine?
 
 If the listing commission is competitive, this is not the time to cut the agent’s commission and incentive to get your home sold. Presuming the agent’s references and success record are satisfactory, a sales commission up to 8 percent could be acceptable.
 
 The most important part of the sales commission is the portion that will go to the buyer’s agent. To illustrate, if your home sale listing offers only a 2.5 percent commission to the buyer’s agent, but other local listings offer a 3.5 percent commission, agents representing buyers are likely to show those homes before yours.
 
 Courtney Silverman advertises her listings extensively on http://www.realtor.com/ .  This allows for maximum exposure of your property to the the buyer population. Contact Courtney Silverman with The Keyes Company / Realtors for to understand how she works to get your property sold.
 
 

Pre-approval letters previously received from mortgage brokers may not be worth the paper they’re written on, as the wholesale lender who may have approved the scenario is either no longer in business or tightening its guidelines. Many sub-prime lenders are closing their doors with little or no warning. A new website has been found that may help you in identifying whether a lender will be able to fund your closing. The website which contains a list of sup-prime lenders in financial trouble is http://mortgageimplode.com. 

Buyers will have to come up with higher down payments, especially if their credit is shaky. The conventional wisdom that the freefall that took place in the previous weeks in wholesale mortgage stocks was isolated to sub-prime lenders and will likely not reverberate throughout the capital markets is wrong.  This meltdown will likely have serious repercussions through the real estate industry. There are now over 50 lenders in serious trouble or out of business, and nearly all the remaining lenders are or will be tightening their credit guidelines, making it much harder for consumers, even ones with good credit to purchase or refinance homes.

Additionally, in Florida a title agent may not disburse funds unless the funds are “collected funds.” See Section 69O-186.008(1), Florida Administrative Code. Generally, under the Code, “collected funds” means funds deposited finally settled and credited to the title insurance agent’s escrow account. Collected funds are funds that are “made by a bank check, cashier’s check, official check, treasurer’s check, or other such official instrument issued by a bank, savings and loan association, or credit union when the instrument is drawn by the bank on itself, or on another bank whether or not the check is “payable through” or “payable at” a bank and the title agent has reasonable and prudent grounds to believe the instrument will clear and constitute collected funds within a reasonable period of time.” The key factor is that the title agent must have “reasonable and prudent grounds to believe the instrument will clear and constitute collected funds within a reasonable period of time.” While one would normally believe a cashier’s check would constitute collected funds that may not always be the case. Checking the above website regularly may help to determine the financial stability of the lender’s check.

Below are some of the lenders who have closed their doors, are expected to stop funding loans or are experiencing difficulties:
 1. Accredited Home. Panic selling analysts are fearful about liquidity and have downgraded rating from “hold” to “sell”; $100 million drop in annual net income expected; missed earnings filing deadline with the SEC.
 2. Acoustic Home Loans. A harbinger of the broader meltdown, Acoustic Home Loans ceased accepting new loan submissions last year; buybacks were a major factor in collapse, according to Business Week.
 3. Aegis Funding. Sub-prime unit has closed and a consolidated operation is reportedly handling prime, slimmed down sub-prime and expanded Alt-A offerings.
 4. Alliance Home Funding. Closed. Parent has folded mortgage brokerage into bank and “taken pre-tax charge of $680000 and an after-tax charge of $449000 to wind down the Alliance Home Funding operation,” according to fourth-quarter earning statement.
 5. Ameriquest. Parent ACC Holdings had to beg Mass. Gov. Deval Patrick, former director, to help get them a life-sustaining line of credit from Citigroup to avoid shutting down. They’ve shut most of their offices, laid off 3,800 people, and have settled with 30 state attorney generals for $325 million over predatory lending practices.
 6. Ameritrust Mortgage Company.  Shutdown, according to email to brokers: “Effective Monday, March 05, 2007 the sub-prime wholesale division of Ameritrust Mortgage Company is no longer in operation. Due to market conditions, our warehouse provider, Washington Mutual, ceased funding for sub-prime loans.”
 7. Argent. Owned by ACC Holdings but may be acquired by Citigroup as part of a deal for working capital and a credit line for ACC if it falters.
 8. Axis Mortgage & Investments. Parent Biltmore Bank of Arizona closed this wholesale subsidiary in November 2006 due to “current lending environment and current conditions of the real estate market.”
 9. Bay Capital/Clear Choice Financial. Press release on January 12, 2007: “Clear Choice has…announced that it is insolvent and in default on numerous obligations…. officially closed the mortgage lending offices of its wholly owned subsidiary, Bay Capital”
 10. Central Pacific Mortgage. Shuttered its door because it was apparently unable to make February’s last payroll, mostly due to rising buyback costs.
 11. Coast Financial Holdings. Distressed because of developers unable to complete construction has put $110 million in loans in jeopardy for loans for 480+ homeowners.
 12. Coastal Capital. Shut down; owner & president indicted in Duke Cunningham scandal.
 13. Concorde Acceptance. Closed as of January 31st, 2007.
 14. Countrywide. Stock in a freefall after announcing that close to 20% of its sub-prime loans are in default. Insiders sold $600 million worth of stock. Reportedly in talks over a merger or alliance with Bank of America.
 15. DeepGreen Financial. Closed as of January 31, 2007 by parent Lightyear Financial, a private equity firm.
 16. DomesticBank. Stopped wholesale operations on 3-2-06, according to their website.
 17. Doral Financial Corp. Has agreed to pay a penalty to settle fraud charges with the U.S. Securities and Exchange Commission for a close to 1 billion overstatement in earnings. On March 2nd, 2007, said it will post losses for 2006 and warned on of a cash crunch if it is not able to refinance $625 million in debt.
 18. Eagle First Mortgage. AZ regulators shut them down citing illegal lending practices. Has until 3-14-07 to wind up operations.
 19. Encore Credit/ECC Capital. Was supposed to be sold to Bear Stearns for $26 million; ECC wound up paying Stearns $7 million to take it off their hands.
 20. EquiBanc. Closed by parent Wachovia after “intensive strategic review.”
 21. Fieldstone. Closed 6 operation centers; had to restructure lines of credit; bought by C-Bass (MGIC & Radian Group) after losing more than 70 percent of its value.
 22. First Franklin. Acquired by Merrill Lynch from National City
 23. Franklin Financial. Apparently has shutdown its wholesale operation as of 5pm 2-28-07; retail may be still alive
 24. Fremont General. FIL (Fremont Investment and Loan, its sub-prime subsidiary) has been ordered to cease-and-desist by the FDIC
 25. FundingAmerica. Closed as of January 19, 2007, little information available on their website.
 26. GMAC. Major layoffs in ResCap; looming writedowns for sub-prime loan portfolio; may take a large ($1 Billion) hit to cover bad loans made by ResCap.
 27. Harbourton Mortgage Investment Corp. Closed as of December 20, 2006, according to company press release “HMIC was forced to take these actions when it was unable to satisfactorily resolve mortgage repurchase claims.”
 28. Home 123 Corp. A subsidiary of New Century, two dozen offices shuttered and 200 jobs cut as of January 17, 2007.
 29. Ivanhoe Mortgage. Unable to fund operations due to a shortage of cash, according to CEO John Cassel
 30. Lender’s Direct Capital Corporation. Closed wholesale operations due to “lack of demand” effective 2-8-07.
 31. Mandalay Mortgage. Notified its brokers that it has exited the nonprime wholesale mortgage business. A message on its Web site said no new loans will be funded after Jan. 31, 2007.
 32. Merit Financial. Shut down because of “rising interest rates”. State regulators investigating.
 33. Meritage Mortgage. Business shut down by parent NetBank. Staff acquired by LIME Financial.
 34. Millennium Bankshares. Winding down all mortgage lending activity by the end of 2006 to “avoid the risks normally associated with mortgage banking activities,” according to press release.
 35. MLN (Mortgage Lenders Network). Has filed for Chapter 11, issued a cease and desist order Jan. 24 by Connecticut banking officials.
 36. NetBank Inc. Laid off the remaining portion of its staff in December after shutting down its sub-prime subsidiary Meritage.
 37. New Century. Stopped funding; in breach of debt covenants and trying desperately to get waivers; restating ‘06 earnings downwards; 10 class-action shareholder lawsuits; may be in “death spiral”, according to analysts.
 38. Novastar. Seriously impaired; likely no dividends in 2007, no taxable income through 2011; many shareholder lawsuits.
 39. Option One. Owner H&R Block has publicly announced it will be sold by end of March 2007.
 40. Origen Wholesale Lending. This modular home lender is transferring its wholesale operations to its correspondent partners.
 41. OwnIt. Ceased operations in December 5th 2006. Filed bankruptcy December 28th.
 42. Popular Financial Holdings. Parent shutting it down and completely exiting wholesale sub-prime to “focus on profitable businesses”.
 43. Preferred Advantage. Closed completely when parent National City sold First Franklin.
 44. ResMAE. Filed Chapter 11 bankruptcy; assets purchased by Citadel Investment Group; being hounded by Merrill Lynch for more than $300 million in bad loans.
 45. ResCap. Laying off about 1,000 people; may force former parent GM to take a $950 million hit due to “loan loss provisions”, according to terms of its sale to Cerberus Capital, says Marketwatch.
 46. Rose Mortgage. Posted on its website: “EFFECTIVE IMMEDIATELY ROSE MORTGAGE CORPORATION IS CLOSED.”
 47. Sebring Capital Partners. Shut its doors as of December 5th, 2006 due to rising defaults, according to company employee quoted by the Denver Post.
 48. SecuredFunding. Ceased funding “based upon market conditions and limited product availability”, according to website.
 49. Silver State Mortgage. Per their website, shut down nationwide wholesale operations as of February 14, 2007.
 50. Summit Mortgage. “Came to terms with a difficult business model in an unforgiving economy.”
 51. Trojan Lending. “Effective as of the opening of business on Monday March 5, 2007, Trojan Lending has ceased its wholesale mortgage operations and will no longer be underwriting or funding wholesale mortgages nationwide.”

I am happy to provide referrals for lenders that close. Call Courtney Silverman 954-389-3459

The recent trend in the Broward County housing market has prompted those of us who care to ask the question – how did so many homeowners get so upside down in their homes? I suppose this question has a three part answer…the declining market, the foolish homeowner, and the crazy mortgage/lending industry. The declining market is out of the average homeowner’s hands. We find ourselves having to place our faith in our legislature to keep our economy strong and in businesses to continue to invest in South Florida. Placing our faith in either, as of late, seems foolhardy at best, and certifiably insane at worst. These two groups of people we are forced to rely on appear to be on opposite sides. The foolish homeowner problem almost always exists. Homeowners always believe their house is worth thousands more than it actually is. Just ask them, and you’ll see. If a house has sold within a 4-mile radius of their house for $600,000, their house miraculously is the mirror image of that house and is suddenly worth $100,000 or more. After all, their house has a 2 1/2-car garage and that house only had a 2-car garage. Based on their irrational exuberance built into the self-assessed values of their own homes, homeowners began using their homes as ATMs to cash out all of the equity in their homes. In some cases, they even cashed out more equity than they had built up in their homes. All they needed to justify it was a job, the notion that the house “around the corner” sold for hundreds of thousands of dollars, and that housing values would continue to rise indefinitely. 

The more people I talk to overwhelmingly point their fingers at the crazy lending institutions that loaned marginal borrowers unbelievable amounts of money. I hear it every day how insane it was for a lender to loan 100% or in some cases more than 100% of the value of the house, interest only, 3-5 year ARMs, with a debt-to-income ratio nearing 50%. What did the lending institution think would happen when (as every market eventually does) the South Florida housing market hit a bump in the road? More and more I see homeowners who (partly to blame) took out these crazy loans, and more unbelievably I see lenders who issued them. The mortgage industry literally bit the hand that was feeding them, and in some cases they ate the whole arm. By setting homeowners up for almost certain failure, the industry didn’t do anyone, especially themselves, any favors. In record numbers, homeowners are unable to sell their homes for what they owe. In record numbers, South Florida homeowners are unable to refinance their homes because of lack of equity. In record numbers, South Florida homeowners are staring escalating interest rates in the face as their ARMs mature. In record numbers, South Florida homeowners are simply walking away from their homes, no longer able to afford them. In record numbers, South Florida homeowners are filing bankruptcy or losing their homes in foreclosure. In record numbers, South Florida homes are sitting vacant – for sale as a bank-owned or REO property. And in record numbers, lending institutions are seeing the fantastic profits realized during the lending boom, slowly melt away.  Only now are people questioning the loans that were given and the criteria used to issue them. The people I talk to are blaming the lenders most of all. They argue that the lending institution, even if not ethically bound not to issue some of these loans, should not have issued them purely for profit. The “lend to anyone” policy of some organizations has served only to turn a slumping South Florida housing market into one that appears to have jumped from the plane without a parachute. What I hear the most is that “they should have known better.” Lenders made obtaining loan approval for huge loans as easy as getting a credit card. The caveat always used to be “buyer beware,” but it seems now that it’s become “borrower beware.” We need to hold our businesses, legislators, lenders, and even ourselves to a higher standard; we need to make wise decisions; and we need to pick ourselves up, dust ourselves off, and move on. We need to practice a little more fiscal responsibility and realize that deficit spending on any level is irresponsible and dangerous.

The LOW INTEREST RATES today……will offset any decline in housing price tomorrow. .IF rates rise!! Buyers LOCK in today - at the low rates…..and insure you will be ahead tomorrow! 

Second Consecutive Rise Points to Limited Fallout From Market Slump in 2007
By CHRISTOPHER CONKEY, WSJ.com
WASHINGTON — Sales of existing homes rose for the second consecutive month in November, a sign of rebounding demand that suggests the economic fallout from the housing market’s slump will be limited next year.  The National Association of Realtors said sales of existing homes last month increased 0.6% from October to an annual rate of 6.28 million units, down 10.7% from a year earlier. Spurred by lower interest rates and home prices, sales have now increased in back-to-back months for the first time in more than a year. 

Together with a recent upturn in the rate of new-home sales, the modest rise in existing-home sales indicates that home-buying activity may be stabilizing after a yearlong downturn. ”The change was small, but the results were encouraging nonetheless because they suggested activity is beginning to form a bottom” said Michael Moran, chief economist at Daiwa Securities America Inc.

If the housing slump is indeed bottoming out and starts to reverse itself in the months ahead, it would gradually lift a great weight off the broader economy. Housing-related industries have been shedding thousands of jobs in recent months, and builders have been forced to scale back construction to match waning demand. That has been a major factor behind the slowing economy this year, and many economists say growth — now running at an inflation-adjusted annual rate of about 2.0% — won’t fully bounce back until the housing correction has run its course.

Of course, it is far from certain that the housing slump is over. Inventories of unsold homes remained large in November, with a 7.3-month supply on the market at current sales rates, according to NAR data, up from a five-month supply a year earlier. That suggests builders will continue to cut production until supply is better aligned with demand. In the meantime, large inventories will continue to put downward pressure on prices.

Last month’s median home price — the price at which half of homes sold for more and half sold for less — was down 3.1% from a year earlier. November was the fourth month in a row that median home prices were down from a year earlier. NAR President Pat Vredevoogd Combs described current conditions as a “window for buyers” to re-enter the market.  Go to Courtney Silverman’s website to look at local inventories in Broward County, Florida.

  Additional support for a rebound is coming from the competitive labor market, which is producing solid wage gains and lifting consumer sentiment. As with the recent data on housing, which generated more relief than enthusiasm among economists, the improved sentiment reading was due more to a moderation in pessimism than any surge in optimism. More than anything, the data suggest the nation’s economy will be able to maintain its current pace of slow-to-moderate growth as the housing imbalance is corrected. “There’s nothing signaling a severe downturn or a severe upturn,” said Lynn Franco, who oversees the Conference Board survey.