Once Ranked Prime, Now They’re Pinched
Home buyers and refinancers who cannot come up with sizable downpayments and whose FICO credit scores are below 680 are about to get squeezed in the mortgage market. Fannie Mae and Freddie Mac are imposing significant increases in fees for a range of borrowers with downpayments of less than 30% who formerly were treated as “prime” credit applicants. At the same time, the two largest private mortgage insurers — MGIC and PMI Group — are raising premiums on consumers who have low downpayments and scores in the mid- to upper 600s on the FICO scale. The added costs for some home buyers could total thousands of dollars, either at settlement or in the form of higher interest rates. “On a loan of $300,000 and with a credit score of 675 — which is not a bad score — and a 75% loan-to-value-ratio (25% downpayment), the cost is an additional $2,250 per loan,” Steven Moore, a mortgage broker with 1st Solution Mortgage in Falls Church, Va., said of the revised Fannie and Freddie fees taking effect on March 1. If the same borrower wants to do a cash-out refinancing to consolidate debt, the new Fannie-Freddie fee schedule will add another $1,500 to total costs on a $300,000 mortgage, Moore said. On a $400,000 loan, he estimates the extra fees would total $5,000. Jeff Lipes, president of Family Choice Mortgage in Wethersfiled, Conn., said the new emphasis on higher FICO scores and larger downpayments could greatly complicate rate quotes. “To get any sort of quote, you’re going to need to know your FICO score in advance, and before actually applying you may need to take some steps to raise your FICO score.” (www.washingtonpost.com)
Washington Post (12/8/07); Kenneth R. Harney
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Crime, Fear and Foreclosure Find Their Way Into Gated Communities
According to Setha Lowe, incoming president of the American Anthropological Association, gated communities are no less crime-prone than open ones, and Gopal Ahluwalia, vice president of research at NAHB, confirms this: “There are studies indicating that there are no differences in the crime in gated communities and non-gated communities.” The security guards often wave people on in, especially if they look like they’re on a legitimate mission. Or the crime comes from within, as in the Hilton Head Plantation community in South Carolina, where a rash of crime committed by resident teenagers has led to the imposition of a curfew. Newsweek recently reported on the gated community of Black Mountain Vista in Henderson, Nev., “where yellow patches blot the Spartan lawns and phone books lie on front porches, their covers bleached from weeks under the desert sun.” According to the Orlando Sentinel, “Countless home owners overwhelmed by their mortgages are taking off and leaving behind algae-filled swimming pools and knee-high weeds” in one local gated community. (www.baltimoresun.com)
Baltimore Sun (12/7/07); Barbara Ehrenreich, the Nation
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How’s Our Housing? Huntsville Market Still Strong, Bucking National Trend
Huntsville, Ala. custom home builder Jim Neighbors says that five years ago a local builder wouldn’t have dreamt of building a half-million dollar spec home, but today there are plenty of them around. While much of the country has been battered by falling home prices, rising foreclosures and suddenly lean times for home builders, Madison County had 2,588 single-family home starts in the first nine months of 2006 and 2,329 more through the first nine months of 2007, according to the Huntsville Madison County Builders Association. “It’s in all price ranges,” said Neighbors, president of the local builders association. “The difference we’re seeing today in Huntsville, is that the price ranges of new homes five years ago was probably $80,000 to $400,000. Now that range is from $125,000 to $2 million." The expected move of some 4,700 jobs directly related to the base realignment process over the next four years has helped spur the building boom, but the area’s very solid economy is the larger explanation, said Betty Hughes, president of the local Realtors® association. With the national news daily reporting plummeting home prices, Hughes said she is spending more and more time counseling people that Huntsville’s market is nothing like trouble spots in Florida and California and the upper Midwest. (www.al.com)
Huntsville Times (12/9/08); Brian Lawson
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Tri-City Housing Market Bucks Trend
Local officials are concerned that bleak national reports are negatively tainting local perceptions of the housing market for the Tri-City area encompassing Kennewick, Pasco and Richland, Wash., where conditions looks relatively rosy. “Markets are local. Just because it’s a national trend doesn’t mean it’s going on in your neighborhood,” said Marchell Mascheck, a Realtor® for Windemere in Richland. “We haven’t followed the national trend for many years.” Through November, the area’s median home sale price increased by about 4%, from $161,800 to $168,300. Unlike other regions, Tri-Cities didn’t experience a housing bubble a few years ago. And it has never had a glut of homes on the market, builders say. “We’re not in an area where investors want to come in and flip properties,” said Jeff Losey, executive director of the Home Builders Association of Tri-Cities. In Boise, Idaho during the housing boom in 2005, for example, investors could buy a home and sell it for 10% to 20% more in six months, he said. But when the market slows, as it did earlier this year, those investors are left with houses that won’t even sell for the purchase price. (www.tri-cityherald.com)
Tri-City Herald (12/9/07); Ingrid Stegemoeller
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Even Hot Housing Markets Can Go Cold
It seems that even some of the nation’s strongest markets, including Utah, the state with the highest third-quarter year-over-year housing price appreciation, are losing steam. For example, in Provo, where home prices leaped 14% in the quarter ending Sept. 30, compared with the same period in 2006, according to the Office of Federal Housing Enterprise Oversight, the Nortons have knocked $30,000 off their original asking price of $368,000, set five months ago, and are giving a 3% discount to any buyer who comes to the closing table without an agent. The nation’s hottest markets have already been weakened by tighter loan restrictions in the wake of the subprime mortgage mess that took hold in August. “It’s really hard for any state to escape a downturn of this magnitude,” says David Stiff, chief economist for Fiserv Lending Solutions in Brookfield, Wis. “There are places that won’t drop. But the strongest markets will roughly be growing at the rate of inflation, so in real terms, they’ll be treading water.” (www.businessweek.com)
Business Week (12/10/07); Prashant Gopal
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Green Effort Grows
Michigan is one of the leaders in the national green building effort, trailing only Oregon and California. There are more than 200 Michigan development projects that are certified by or seeking certification by Washington, D.C.-based Leadership in Energy and Environmental Design. Additionally, there are about 150 individual houses certified by the Grand Rapids-based nonprofit Green Built Michigan, which is endorsed by the Michigan Association of Home Builders. For builders who don’t know how to construct green structures, Green Built Michigan has an educational program that has seen about 1,000 trainees. Last fall, the organization established a Detroit chapter. Christopher Pratt, who designed and constructed the Cedar Pine subdivision in Troy, has pledged to train 200 developers in the next year. “The objective of this group is to raise the educational level and skill level of green builders across the state,” said Green Built Michigan President Arn McIntyre, who sits on the Washington-based American National Standard Institute Consensus Committee to develop standards for national green building. (www.freep.com)
Detroit Free Press (12/10/07); Christy Arboscello
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