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Fannie Mae Gives go-ahead for lenders to assist with closing costs


While it’s not quite the same as the down payment assistance that the government-sponsored enterprises used to allow, lenders now have a new way to help borrowers buy a home – closing cost assistance.

Fannie Mae announced this week that it will now allow lenders to contribute to borrowers’ closing costs, as long as the money is a gift and is not used towards a borrower’s down payment.

Over the last few years, Freddie Mac on a larger scale, and Fannie Mae on a smaller scale, allowed lenders to gift money to borrowers that could be used on their down payment on a 3% down mortgage.

Under the programs, lenders would “grant” 2% of the down payment to the borrower. Add that to the borrower’s 1% contribution, and you would have the 3% needed to qualify for the Fannie and Freddie programs.

These programs fell out of favor after some lenders began rolling the “grants” back into the loans themselves in the form of premium pricing, wherein the lender would charge a higher interest rate in exchange for the down payment assistance.

That raised some flags with the Federal Housing Finance Agency, which eventually led to Freddie ending the program last summer.

At the time, the FHFA told HousingWire that it was monitoring the situation and had some concerns about the risks associated with charging certain borrowers higher interest rates in exchange for down payment assistance.

The FHFA told HousingWire that it was concerned that those borrowers might end up paying more over the life of the mortgage than what the lender provided in assistance.

So, the down payment assistance programs ended, at least in terms of the 2% coming directly from the lender and needing to be repaid.

Recently, HousingWire exclusively reported that United Wholesale Mortgage would be ending its 1% down program, in which the lender was gifting the entire 2% of the down payment to the borrower and not pricing the gift into the loan.

But now, lenders who sell their loans to Fannie Mae can begin offering closing cost assistance to borrowers, under certain circumstances.

According to an announcement sent this week by Fannie Mae to lenders, the money must be in the form of a gift and cannot be subject to any sort of repayment requirement.

Additionally, the money must not be used to fund any portion of the borrower’s down payment. The money can be used for closing costs and fees only.

Fannie Mae also said that there is no limit on the amount a lender can give to a borrower, just as long as it does not exceed the total closing cost amount.

“We’re making it easier for borrowers to purchase a home by allowing lenders to fund closing costs and prepaid fees,” Fannie Mae Chief Credit Officer for Single-Family Carlos Perez said in a letter to lenders.

“While there is no limit to the amount of the lender-sourced contributions, the funds cannot be used toward a down payment, cannot exceed the total closing costs, and should not be subject to any form of repayment agreement,” Perez added.

Additionally, Fannie Mae notes in its lender bulletin that the closing cost assistance must come directly from the lender and cannot be passed to the lender from a third party.

And now, for the fine print, taken from Fannie’s lender bulletin:

The amount of the lender contribution should not exceed the amount of borrower-paid closing costs and prepaid fees. Otherwise, the amount of the contribution is not limited except when the lender is an interested party to a purchase transaction as defined in B3-4.1-02, Interested Party Contributions, and in that case, the interested party contribution (IPC) policy applies. Any excess lender credit required to be returned to the borrower in accordance with applicable regulatory requirements is considered an overpayment of fees and charges, and may be applied as a principal curtailment or returned in cash to the borrower.

A spokesperson for Fannie Mae told HousingWire that the program was previously available on a limited trial basis to certain lenders. But now, the GSE is making the option available to all lenders.

According to Fannie Mae, lenders can begin contributing to borrowers’ closing costs under those specified conditions immediately. The change goes into effect now.

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Proposed idea on how to make housing cheaper in California

Wooden-block-house-on-money.jpgIt’s a controversial idea that advocates say could help alleviate California’s worsening housing crisis: strip cities of some of their zoning authority to unleash an enormous amount of new construction.

State Sen. Scott Wiener of San Francisco wants to give the state more power over land use within a half-mile of major transit stops or a quarter-mile of bus lines to create a more developer-friendly environment for new housing.

But the proposal isn’t finding its footing with California’s candidates for governor this year. Both major Republicans flatly oppose it. Even Democrats who were initially favorable are clarifying their position or walking back from previous comments as opposition heats up from mayors and other local elected officials.

“You have to be as bold as the problem is big – encourage the kind of work that Scott Wiener is doing,” Democratic gubernatorial candidate Gavin Newsom said earlier this month. “All of that I think is inherently a requirement…for the next administration if we’re going to get out of this rut and get serious about this crisis in this state.”

Newsom at the time said he admires Wiener’s “ingenuity and resolve” on pushing aggressive housing bills. “I think it’s required at this moment,” he said.

But Newsom spokesman Nathan Click emphasized to The Sacramento Bee this week that he has not formally endorsed the measure. Asked to explain his position, Newsom said in a statement that he supports “the intent” of the bill but did not specify his concerns.

Both Democrats and Republicans in the race have pledged a massive wave of new construction if elected in an effort to bring down housing costs – or at least slow the increase. Yet the debate around Wiener’s bill, which he acknowledges might not reach Gov. Jerry Brown’s desk this year, underscores the thorny political environment they’d be forced to negotiate to accomplish their goals.

Senate Bill 827 would establish a uniform statewide standard for housing in transit-rich zones and prevent cities from blocking construction of new multifamily apartment buildings based on height or density.

Early in March, former Los Angeles Mayor Antonio Villaraigosa said that “too many communities…too easily push back and say ‘no.'”

“We’re going to have to address that,” he said. “I want to start out with incentives…but if necessary, in order to deal with this man-made disaster, we’re going to have to push back and do by-right,” a speedier approach to housing that removes some local authority over land-use regulations.

He said in back-to-back debates this week that he’d like to see part of the bill strengthened to apply to areas not well-served by transit. But he is opposed to its major component – giving the state more authority over housing development near transit in cities and counties.

“It goes too far on the zoning,” Villaraigosa said about the bill at a debate in San Diego Sunday. “I don’t think any mayor in the state wants the state government – the governor and the Legislature – to tell them what they need to do.”

Former state schools chief Delaine Eastin said this week she thinks the bill “needs some work” to “ensure some more local control than it’s giving right now.” Earlier the Democrat supported it, saying on March 8 that “I think it’s time and it’s over past due.”

State Treasurer John Chiang, also a Democrat, had not said firmly where he stands until Monday night.

“I would veto it, as of today,” he said of the Wiener bill. “I want to build around transportation centers…but we need to make sure there’s local control.”

Story Source: SacBee

StoryPic: Housing Wire

People are losing homebuying spirit as confidence in the market grows


Americans are growing increasingly confident in the economy and their financial situation, however this is not translating into a more positive view that now is a good time to buy a home, according to the National Association of Realtors’ first quarter Housing Opportunities and Market Experience survey.

Heading into the spring home buying season, about 68% of consumers said now is a good time to buy a home, the survey showed. This is down from 72% last quarter, and is the lowest point in the past two years.

This optimism is even lower among renters, where 55% say now is a good time to buy a home, down from 60% last quarter. Homeowners, older respondents and those living in the more affordable regions of the Midwest and South held a more positive outlook.

And now experts are saying this competition and rising home prices are only going to get worse as the spring home buying season kicks into full gear.

There is, however, a light at the end of the tunnel. An increased share of homeowners now believe now is a good time to sell their home. The share of homeowners saying now is a good time to sell increased from 71% last quarter to 74% in the first quarter. This is second to the third quarter last year’s all-time high of 75%.

“There’s no question that a majority of homeowners have amassed considerable equity gains since the downturn,” Yun said. “Home prices have grown a cumulative 48% since 2011 and are up 5.9% through the first two months of this year.”

“Supply conditions would improve measurably, and ultimately lead to more sales, if a growing number of homeowners finally decide that this spring is the time to list their home for sale,” he said.

More households said they believe the economy is improving compared to the fourth quarter of 2017 with a share of 60% versus 52% last quarter. Economic optimism was down slightly from the first quarter last year, when it hit 62%.

“The jump in optimism to start the year can be attributed to the robust job creation in most of the country, as well as the larger paychecks households are enjoying because of faster wage growth and the recent tax cuts,” Yun said. “These three positives should further ignite buyer demand.”

“However, several metro areas with the healthiest labor markets also have the most severe supply and affordability pressures,” he said. “This troublesome reality is what’s dampening moods and keeping many would-be buyers at bay.”

Along with the heavy competition, saving up for a down payment is also one of the barriers preventing non-homeowners from buying a home. Non-homeowners responded that some things keeping them from saving up for a down payment include 47% saying limited income, 30% saying student loan debt, 28% saying rising rents and 14% saying health and medical costs.

“It’s never too early for those wanting to own a home in the future to sit down with a lender to discuss their current financial situation,” NAR President Elizabeth Mendenhall said. “Homeownership could be a more attainable goal once an interested buyer finds out how much they can afford to buy, as well as what steps, if any, are needed to improve their chances of obtaining a mortgage.”

In fact, the latest real house price index from First American Finance Corp., which measures affordability by comparing home prices with the rate of inflation and the current interest rates, found that it is actually historically affordable to buy a home. The index showed while home prices are increasing, “real house prices,” or its affordability measure, are down a full 35.8% from the housing boom peak and 13.8% from the January 2000 price levels.

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FHA insures approximately 10,000 ineligible borrowers in 2016.


A new report from a federal watchdog finds that the Federal Housing Administration incorrectly insured approximately $1.9 billion worth of mortgages in 2016.

The new report, which was published recently by the Department of Housing and Urban Development Office of Inspector General, found that in 2016, the FHA insured an estimated 9,507 borrowers who were actually ineligible for FHA insurance because the borrowers had either delinquent federal debt or who were subject to federal administrative offset for delinquent child support.

“Of loans closed in 2016, FHA insured more than 9,500 loans worth $1.9 billion, which were not eligible for insurance because they were made to borrowers with delinquent Federal debt or who were subject to Federal administrative offset for delinquent child support,” HUD-OIG noted in its report.

The issue is this: The FHA’s guidance prohibits lenders from continuing to process a mortgage application for an FHA-insured mortgage for borrowers with delinquent federal non-tax debt, held by agencies like the Department of Education, the Department of Justice, the Small Business Administration, or the Army and Air Force Exchange Service.

At that point, lenders need to verify the validity and delinquency status of the debt by contacting the creditor agency to which the debt is owed. If the creditor agency confirms that the debt is valid and in delinquent status as defined by the federal Debt Collection Improvement Act, the borrower is ineligible for an FHA-insured mortgage until the borrower resolves the debt with the creditor agency.

The Debt Collection Improvement Act of 1996, which prohibits a person from obtaining any federal assistance in the form of a loan, loan insurance, or guarantee if that person has a delinquent outstanding debt with any federal agency.

Additionally, federal regulation allows an offset of federal payments to satisfy delinquent non-tax debt owed to the government and to collect past-due child support obligations. Agencies also must deny federal financial assistance to individuals who are subject to administrative offset to collect delinquent child support.

According to the HUD-OIG report, the FHA insured more than 9,500 loans that were ineligible because they failed those qualifications. The total value of those loans was $1.9 billion.

Now, it should be noted that the number of ineligible mortgages was a small percentage of the total number of loans the FHA insured in 2016. According to the HUD-OIG report, the FHA insured more than 1 million loans totaling $212 billion during calendar year 2016.

But HUD-OIG didn’t examine all of those loans. Rather, the watchdog reviewed a small sample and extrapolated the results of that exam out over the entire population.

From the report:

We reviewed a statistical sample of 60 loans from a universe of 13,927 FHA-insured loans that closed in 2016 and also had data on their related borrowers in the Bureau of the Fiscal Service’s Do Not Pay databases. The Do Not Pay Business Center supports Federal agencies in their efforts to reduce the number of improper payments. Do Not Pay allows agencies to check various databases before making payments or awards to identify ineligible recipients and to prevent fraud or errors. We verified that 47 of the 60 sample loans were made to borrowers who were barred by Federal requirements. We used these results to project the total number and value of ineligible loans insured by FHA.

As for what to do about it, the watchdog has some suggestions.

“We recommend that FHA put $1.9 billion to better use by developing a method for using the Do Not Pay portal to identify delinquent child support and delinquent Federal debt to prevent future FHA loans to ineligible borrowers,” HUD-OIG noted.

“We also recommend that FHA revise the single-family handbook to comply with the regulation that prevents loans to borrowers with delinquent child support subject to Federal offset and schedule the timely renewal of data-sharing agreements to prevent data loss in the Credit Alert Interactive Voice Response System or discontinue use of CAIVRS if the information duplicates the information available in the Do Not Pay portal,” HUD-OIG added.

In a letter of response that was included in the report, the FHA said that it agrees with the OIG’s recommendations and plans to work with the Department of the Treasury to put the recommendations into action.

For the full HUD-OIG report, click here.

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Concrete firm in West Sacramento geared for student housing

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Precast concrete fabrication company Clark Pacific is going to college.

Company executives are hoping to go to several colleges, actually, if their new CP Campus Housing division takes off. The West Sacramento-based company wants colleges and universities, as well as off-campus housing developers, to use precast techniques for their next projects.

Roy Griffith, Clark Pacific’s director of corporate development, said the company believes there’s work on the way. Across California, many higher education institutions are seeing expanding enrollment and need new places for students to live. Locally, California State University Sacramento and University of California Davis have a combined half-dozen on- and off-campus housing projects in the works.

By building precast panels for student housing projects at its plants in West Sacramento or Woodland and then shipping them to the campus for assemblage, Griffith said, he believes his company can deliver on guarantees to open new student housing by the time a school year begins in late summer or early fall.

“In the sense of looking at speed of construction, you’re doing it on an active campus,” Griffith said. “The less disruption, the better.”

CP Campus Housing will also use Collaborative Design Interface, a design tool to help flesh out project concepts. That will allow the company to be a design-build partner on new projects.

Concrete student housing projects are sturdier and last longer than those built of other materials, Griffith said.

Clark Pacific has also started a glass division, so it can install windows as part of panel fabrication.

Griffith acknowledged a potential downside of precast concrete is that it can be difficult to transport, as modules are often box-shaped and ungainly.

The company’s new division will only build panels, as a way to provide more flexibility in projects’ final look, he said.

Clark Pacific is already working on a graduate student housing project that will eventually go up at Stanford University.

“We don’t want someone walking down the street and saying, ‘that’s a pre-fab building,’” Griffith said. “We want someone to say, ‘that’s a beautiful building and I want to live there.’”

Pic and Story: sacbizjournal

Not enough homes for the spring rush!

9611f6c12bda520452c7182db706a659w-c0xd-w685_h860_q80.jpgAs we enter the spring home-buying season, hordes of would-be homeowners are ready to go—but there weren’t enough new-home sales in the beginning of the year to quell the already strong demand.

Only about 618,000 newly constructed homes were sold in February, according to a joint report by the U.S. Census Bureau and U.S. Department of Housing and Urban Development. That’s down 0.6% from January, but up 0.5% from February 2017.

(® looked only at the seasonally adjusted numbers in the report. These have been smoothed out over 12 months to account for seasonal fluctuations.)

“There is plenty of room for growth,” Chief Economist of Danielle Hale said in a statement. “More new-home sales are needed to restore balance in the housing market. … Today, one in every 10 homes sold is a new home, whereas in a normal market they account for one in every seven homes sold.”

Currently, there aren’t enough homes to go around, particularly at more affordable prices. The median price of newly constructed homes notched up to $326,800. It’s up nearly 0.6% from the previous month and almost 9.7% from the same month a year ago.

That’s considerably more than existing homes, which cost a median $241,700 in February, according to a recent National Association of Realtors® report. Newly constructed homes cost more than existing ones thanks to high land, labor, and materials costs. They also typically come with the latest designs, finishes, and appliances.

Only about 13% of the newly constructed homes sold in February cost less than $199,999, according to the report. The bulk of them, about 58%, were between $200,000 and $399,999. An additional 12% cost between $400,000 and $499,999, while 17% were priced at $500,000 and up.

The most new homes were sold in the South, where buyers closed on about 338,000 new homes in February. That’s a 9% jump from January and a 0.6% bump from February 2017.

The region was followed by the West, where about 164,000 new homes changed hands. This represented a 17.6% monthly drop, but a 3.1% annual increase.

Next up was the Midwest, with 79,000 sales, down 3.7% from January and 8.1% from the same month a year earlier. The Northeast had the fewest new-home sales, at just 37,000. But that was up 19.4% from the previous month and 8.8% from February 2017.

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Westlake Village in North Natomas sells for $11.3 million – with room to build

Screenshot 2018-03-23 18.44.40.pngA retail property at a high-traffic North Natomas intersection — with more than 4 acres of developable land — has a new owner.

Escrow closed in mid-February for Westlake Village, a 31,980-square-foot shopping center at 3501-3511 Del Paso Road. Bay Area-based RRJ Cambridge Partners LLC/Mary Jo Shepherd Trustee acquired the property at Del Paso and El Centro roads for $11.3 million, property records show.

Anchored by Walgreens, the center also has Chase Bank, Allstate Insurance, Subway and Westlake Hair Studio as tenants. At the time of sale, 92 percent of its space was occupied.

Bill Asher, an executive vice president with Hanley Investment Group who brokered the sale, said there was plenty of interest from prospective buyers.

“It garnered a considerable amount of interest,” he said, adding Hanley marketed the property both collectively and in individual pieces. Because of the exchange deal sale of another Northern California retail property, it made the most sense for the buyer, a family trust, to acquire all of it.

The buyer cited the stability of Westlake Village’s tenants, all of whom have been there since 2011, as one of its reasons for acquiring the property, Hanley said in a news release. Many of the tenants also offer basic daily needs and aren’t vulnerable to competition from online retailers, according to the release.

Asher said the 4.36-acre undeveloped portion of the property was also an asset. “They’re excited about the opportunity to develop that,” he said, though the buyers have no immediate plans to do so.

Hanley, based in Orange County, sold the property on behalf of Donahue Schriber Realty Group. Asher and Hanley Investment president Ed Hanleyworked with Ten-X to market the property on behalf of Donahue Schriber. Eric Vu, an associate with Hanley, worked on behalf of the buyer.

Pic and Story Source: SacBizJournal