More COVID-19 influenced thoughts

I last wrote about loan forbearance and kittens.

Since then quite a few folks have talked with their lenders, and gotten forbearance agreements for their mortgage payments.  But...many of the forbearance agreements, in the fine print, require re-payment of the full deferred amount at the end of the forbearance period.  This means, if you defer payments for three months, you'd have to pay those three months' payments after three months.  So unless you'll somehow come by that due balance all at once, I'd think twice before signing such an agreement.  It may still be worth contacting your lender to ask, but do read the fine print.

Currently, real estate activity is still permitted in both Oregon and Washington.  Open houses and brokers open houses are pretty taboo, and our multiple listing service has removed that data field, making it challenging to promote open houses.  This is as it should be.  Most offices have recommended  protocols in place for property showings including cleaning, booties, hand washing and social distancing.  Title companies are continuing to close transactions, and county recording offices are handling electronic recordings.

The City of Portland permit office is closed, so building permits, including those for sewer repair/replacement and radon mitigation systems are not available.  Multnomah County's in-person recording window is closed.  It's a challenge to get repairs completed prior to closing, and moving  companies either aren't working, or are very booked.

It sounds as though some loan programs geared toward first time and low income buyers, may be tightening their lending requirements.  Programs like FHA have traditionally allowed a buyer to have a lower down payment, lower credit score and higher debt level than conventional loans.  While these programs will remain more approachable than conventional loans, they will be requiring buyers to have an amount of financial strength.

A few blogs ago, I talked about ibuyers; Zillow, OpenDoor and others.  These companies can offer an easy button to sell your house quickly when timing or other circumstances make selling via traditional means untenable.  Now seems like a great time to use this service, if, for instance you need to sell for a job relocation, to lessen expenses during the pandemic etc.  Oh, but Zillow isn't buying right now, and I'm not sure about OpenDoor.

Who is working now, (carefully) are Realtors; licensed and doing business here in Portland.  We're taking plenty of precautions, with cleaning and distancing protocols in place.

And kittens!  What about kittens?!  Actually, today I'm thinking about puppies!

The folks at One Tail at a Time will soon have puppies available for adoption.  If a puppy seems like too much work (they are very busy creatures) One Tail at a Time has more mature dogs too.  You just might need a buddy...

Update regarding the government shut down and real estate

Now that the "shutdown" is here, we are starting to see how things are playing out with real estate transactions and government agencies.  This information comes to me courtesy of the National Association of Realtors, who, as you might imagine, is monitoring this all rather closely.

"The IRS is closed and has suspended the processing of all forms, including requests for tax return transcripts."    In my experience, many lenders do not necessarily  require this, but tax return transcripts can be an easy way of documenting financial status.    It sounds as though some lenders are looking at temporarily revising some underwriting policies, and some may be looking at simply delaying the requirement for the forms, even until after closing.  I'm not quite sure how that would play out.

The Social Security Administration is also closed and isn't tending to most customer requests.  " According to the SSA Contingency Plan, verifying Social Security numbers through the Consent Based SSN Verification Service will also be suspended during the shutdown."  Similar to the IRS issue, this will pose a problem for loan processors.  Some lenders may be instituting policies to provide for Social Security Number verification after closing.

Indications are that FHA will continue to process and endorse new single family loans, but that multifamily (think duplexes and such) will not receive new commitments.  Delays in FHA loans, even single family loans are likely.

VA loans and the National Flood Insurance program shouldn't be effected by the shut down.

USDA loans in process, that have already received loan commitment, will not be affected.  No new loan commitments will be issued.  In general, USDA loan commitments are good for something like 90 days.

Programs intended at stabilizing existing homeowners through the Making Home Affordable program (HAFA and HAMP) will not be affected.

The above information was released by the National Association of Realtors on October 3rd.  I expect to see similar updates if the shutdown drags on much longer.  If you are in the middle of a purchase and have specific questions, I'd suggest talking with your mortgage broker.

Anecdotally, I have three clients with purchases in escrow right now. One, a cash offer, will feel no affect.  The two others are not FHA or VA loans, and have already been through the documentation and underwriting process, so we're optimistic they'll close on time.

A government shutdown and your real estate transaction

They say the economy of the United States lives and dies with housing.  So one might wonder how a government shutdown would effect the real estate industry.

Loan programs guaranteed, or administered by a branch of the federal government will clearly be hit the hardest.

 FHA loans, which have been lauded as the backbone of the housing recovery, won't be made during a shut down.  Use of these loans has been easing as the economy improves, and some of the more generous portions of the program have been trimmed back.  FHA loans still make up a significant portion of first time buyer loans.

Similarly,  Federal VA loans and USDA loan programs will grind to a halt.  As you might imagine, Federal VA loans are a GI benefit, and help provide housing for veterans.  USDA loans encourage home ownership in rural and small town communities. 

Even non-"government" loans will be affected.  There are several interactions loan processors have with the federal government merely to underwrite loans and complete home purchases;  tax return transcripts and social security number verification, to name a few.  These steps must be completed for many home loans to be funded.

Loans underwritten by Fannie Mae and Freddie Mac  may be able to fund, as long as they don't  need any information from the Internal Revenue Service or the Social Security Administration.

If you are in the middle of a home purchase or refinance, check with your lender to see how a government shut down might affect your transaction.

Certainly, a government shut down will have a broad reach into many parts or our lives, and well beyond real estate. This blog is a mere glimpse...

That popular FHA financing

For years, FHA (Federal Housing Administration) have long been a staple of first time and lower income home buyers.  In general, FHA loans allow a buyer to have lower credit scores and a bit more debt, along with lower down payments, than conventional loans.

As you might imagine, the housing crisis was especially hard on the Federal Housing Administration.  The National Association of Realtors reports that an independent audit shows the  FHA has an economic value of negative $13.48 billion.  Over the past few years FHA has been making a variety of slight adjustments; increases in their mortgage insurance and funding fees.  This spring brings another wave of changes in an effort to stem the tide.

The two most notable changes are:

 1) Raising the annual mortgage insurance premium by 10 basis points, or about $13 per month on the average loan.

2) Making the mortgage insurance permanent; meaning MIP can no longer be removed once an owner achieves 20% equity.   Keep in mind though, the average FHA loan turns over quicker than conventional loans as they are often used to buy that first, starter house.

These changes to FHA are a balancing act; address FHA's financial strength (or lack of it) without putting a damper on the now recovering housing market.

Read the FHA report here.

Between Seattle and Austin...

Recent  Data On an Old Question
Trulia just released their Winter 2012 Rent vs. Buy study looking at 100 metro areas and considering their rent vs. buy ratio.  If you aren't famliar with Trulia, their website says,

"Trulia is an all-in-one real estate site that gives you the local scoop about homes for sale, apartments for rent, neighborhood insights, and real estate markets and trends to help you figure out exactly what, where, and when to buy, sell, or rent."

Trulia, similar to Zillow, has access to a bunch or real estate data and does some pretty interesting things with that data.

In looking at renting vs. buying, they considered asking prices for both rental and for sale properties for December 1,  2011 to February 29, 2012.  It is nice to have pretty recent numbers, as often real estate statistics can lag by several months, which in a changing market, matters.  Yes, we are in a changing market.  There is an inherent assumption here, that seasonal pressures on prices, rent and purchase, are similar; an assumption with which I agree.

Trulia's interpretation of the index says anything under 15 is a market in which buying is better than renting.  From 15 to 20, the question hinges on tax deductions, local programs and incentives and other indicators.  Anything over 20 is a market in which renting is considered better than buying.

Only two major markets in the United States showed indicators above 15; San Francisco and Honolulu.  Some niche markets in New York city eke above 20, but not the city over all.

Portland, which the report calls Portland, OR WA, ranked # 82 with a factor of 11. Seattle is just above us at #81, and our somewhat sister city of Austin, TX is at #83.  It seems we are in good company.  As one might expect, Detroit, MI ranked #1 as the city where buying is a better idea than renting.  hmm.

A few other housing thoughts.
The Oregonian reported today that 30 year fixed rate loans snuck above 4%. And a reminder for buyer's using FHA insured loans, in a well advised effort to increased their reserves, the  monthly mortgage insurance premium from 1% to 1.75% for loans originated after April 1st.  Read more about that here.  This change is estimated to cost the average buyer about $5 more per month, which translates to approximately $1000 of home buying power.

Read Trulia's report here.