From Fannie and Freddie, Here Come the Fee Increases

As of April 1, Fannie Mae and Freddie Mac are increasing the delivery fees they charge lenders based on FICO scores, downpayment amounts and other loan characteristics. Most major lenders already are pricing in these higher fees, effectively raising costs to borrowers immediately. Lenders can pass these fees on to the consumer in the form of higher interest rates rather than as an upfront charge. Under the new guidelines, even applicants who assumed that their FICO credit scores would get them favorable rates will be charged more unless they can come up with downpayments of 30% or more. For example, a buyer with a 699 FICO score who brings a sizable downpayment of about 25% to the table will be hit with a 1.5% delivery fee at closing under the new guidelines. A buyer with a FICO score between 700 and 720 will pay an extra three-quarters of a point. Even someone with a 739 FICO — once considered a platinum guarantee of the best rates available — will get dinged with a quarter-point add-on. Condominium buyers who cannot come up with a 25% downpayment will be hit with a three-quarter point add-on penalty, no matter how high their credit score — simply because they are not purchasing a traditional detached, stand-alone house. Without congressional intervention or new marching orders from the companies’ regulator, the add-on fees are here to stay. But there’s an alternative available for just about anyone who wants to avoid the fees: Federal Housing Administration mortgages, where downpayments go as low as 3.5% and credit scores are not an issue for most applicants. (www.washingtonpost.com)
Washington Post (2/14/09); Kenneth R. Harney

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Fannie Eases Its InvestorLoan Rules

Fannie Mae has told lenders that starting next month it will buy or guarantee home loans made to borrowers that have mortgaged as many as nine other properties. Currently, it will not touch a loan if the borrower has financed more than three other homes. The change is meant “to bring added liquidity to the investor segment of the market and help hasten the recovery," Fannie said. However, the GSE, which said it wants to make more loans available to “high-credit quality, bona fide…experienced investors,” is tightening other requirements for this type of borrower. Starting in June, an investor will have to hold six months of payments in reserve, rather than two months, to get a single-family loan approved by Fannie’s automated system. Since they were downsized by the government last year, Fannie and Freddie Mac have been directed to put more emphasis on supporting the housing market; like other prospective home buyers, investors have been dissuaded from making purchases by tightened underwriting standards and forecasts that prices will keep tumbling. “Investors are often the first sign of a stabilizing market,” said Joe Garrett, a principal at Garrett, Watts & Co., a consulting firm in Berkeley, Calif. “One of the things that leads the economy out of a housing crisis is when prices get cheap enough that investors start moving in and buying things....Then the owner-occupants see that prices have stopped falling — they see how cheap prices have gotten, and they start to jump in.” (www.americanbanker.com)
American Banker (2/10/09); Harry Terris

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Looking to Build on the Future

Katherine Renn takes the reins of the Peninsula Housing and Builders Association in Virginia with residential building permits in the Hampton Roads area at their lowest level in at least 28 years. But the way she sees it, the market has hit bottom, so there must be good times ahead. “I think we’re on the way up,” said Renn, the association’s 2009 president. “That might be because I’m an optimist, and I really want to believe that.” Builders in the local market are adapting to the new-home slowdown by moving into remodeling or commercial projects. “It’s a little scary stepping outside what you normally do, but they’re holding on until the economy gets better,” she said. Renn’s business, the Kicotan Co., which usually works on custom-built homes, is branching out into the multifamily market. Not only are the number of new homes down in the area, the size of homes is dropping, too. Buyers are looking for homes in the 2,500- to 2,800-square-foot range — down from the 5,000-square-foot homes that popped up during the recent boom, Renn said. They’re looking for a streamlined design with more functional space. “You’re probably cutting out rooms you’d never use,” she said. Buyers still want the perks — the granite counter tops, the hardwood floors, the lavish fixtures, the heated bathroom floor, the spacious master suites and bathrooms — that came along with those big homes, she said. They also want nice outdoor spaces, such as patios and stamped concrete. “They’re not really cutting back on those things,” she said. “As soon as everybody gains a little more confidence, sales are going to start,” Renn said. “We’re already seeing some of that.” (www.dailypress.com)
Newport News Daily Press (2/11/09); Veronica Chufo

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Paying $1,299 for a Washer in Order to Save $90 a Year

Appliance makers are pushing a new wave of energy-efficient products this year. But instead of simply marketing them as “green,” companies are now pushing their products’ potential cost savings, in an attempt to attract penny-pinching consumers during the economic downturn. At the International Builders’ Show last month, manufacturers advertised long-term cost-savings estimates for a host of new appliances. General Electric, for instance, says its hybrid electric water heater to be released this year will save consumers about $250 annually. Kohler says that switching to its latest models of water-conserving shower heads, toilets and faucets saves a family of four between $90 and $200 a year. Whirlpool Corp. says its new top-load Cabrio HE washer (which retails for $1,199 or $1,299) can save up to $900 in lifetime water and energy costs (or $90 a year, since the company assumes the machine’s lifetime is 10 years.) Appliance manufacturers are pushing the financial savings because their eco-friendly green appeal alone may otherwise be a hard sell in a recession. But energy-efficient products are also becoming more attractive because the price difference between them and traditional devices is narrowing. Kohler, for instance, says it doesn’t charge extra for its products that met efficiency standards for the federal WaterSense designation. Whirlpool now offers Energy Star-rated models of its Classic washers and dryers, which are priced between $549 and $679 and are generally cheaper than its other lines. (www.wsj.com)
Wall Street Journal (2/12/09); Anjali Athavaley

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Home Buyers Go Green to Cut Bills

In an attempt to boost sales in a dismal market, home builders are turning to what has been one of the most overlooked aspects of a house: improving the way it uses energy. While the sales results are mixed so far, industry experts say the move could eventually boost business as more cost-conscious consumers seek to save on rising power bills by having a more efficient home. Already, builder Kevin Enyeart, in Lee Springs, Mo., says he has picked up two contracts and possibly a third over the past six months to sell homes to buyers who specifically requested energy-saving features, such as better insulation and tighter-fitting windows. That’s rare good news in a market Enyeart says is so bad that he has had to cut the number of homes he builds to about 20 a year from 40. “I used to be a pessimist about going green, but not anymore,” he says. Energy efficiency, in particular, has emerged as a top priority for consumers because power bills have more than doubled in many markets. When asked to list their top 12 influences in buying a home, consumers responding to an NAHB survey last year put energy efficiency at No. 2, behind quality of living space. Five years ago, energy didn’t even make the same survey. (www.wsj.com)
Wall Street Journal (2/12/09); Jim Carlton

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Mexican Developers Target Aging Americans With Inexpensive Senior Housing

With the average monthly rent for an American assisted living unit approaching $6,000 and nursing home rents topping $8,000, senior communities in some quaint Mexican cities are choosing to offer these facilities for as little as $1,100 a month. There are more than a million aging Americans and Canadians who have already retired in Mexico, and many of them, like the estimated 76 million of their baby boomer peers in the states, will increasingly require greater levels of care. Inevitably, as rents for U.S. senior facilities continue to skyrocket, many will discover that their depleted retirement funds won’t cover the costs. And some far-sighted Mexican developers are already taking notice. As Eduardo Alvarado, chief executive officer of La Moreleja, a residential development in San Luis Potosi, a bustling northern Mexican city with a population of nearly 700,000, observes, “Senior housing is not going to be a niche market. It’s going to be an entire industry. We already have the pioneers here, but what we are seeing is that many people will come, perhaps not because they want to, but out of necessity.” Mexico, he claims, is far more modern and much safer than Americans imagine. So far, however, assisted living facilities are unregulated in Mexico. They’re so new — with only about a half-dozen in the country — that laws are yet to be adopted to cover them. The Mexican Association of Retirement Communities is seeking regulations similar to those governing U.S. senior housing properties. (www.newsfornatives.com)
NewsForNatives.com (2/3/09)

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