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Foreclosed Homes to be Sold to Investors to use as Rentals

by Roberts Johnson and Rachel Diedrich, Real Estate B

NEW YORK (CNNMoney) -- Federal officials hope to launch a pilot program in early 2012 to convert government-owned foreclosures into rental properties.

The program, which was cited by Federal Reserve Chairman Ben Bernanke last week as one way to address the housing crisis, would sell foreclosed homes now owned by Fannie Mae (FNMA, Fortune 500) and Freddie Mac (FMCC, Fortune 500) to investors in bulk. The properties would then be converted into rentals.

The initiative began back in August, when the Federal Housing Finance Agency, the Treasury Department and the U.S. Department of Housing and Urban Development announced they were seeking suggestions on ways to dispose of repossessed homes now owned by Fannie Mae, Freddie Mac and the Federal Housing Administration.

In addition to getting the properties off the government's books, officials are hoping putting the homes back into productive use will stabilize neighborhoods and housing values. Also, it is looking to expand the supply of rentals, which are increasingly in demand.

The agency is not releasing details on how the rental program would work, instead saying it is "proceeding prudently but with a sense of urgency to lay the groundwork for the development of good initial transactions in early 2012."

Administration officials said they are continuing to work with the agency to develop the program.

Housing, stocks, gold and oil: Hot or not in 2012?

Until now, most foreclosed homes have been sold individually because investors have demanded bigger discounts to buy large numbers of properties.

But federal officials are warily eyeing the expected surge in foreclosures as banks ramp up their action against delinquent homeowners. The process had been stalled since late 2010 when banks' shoddy paperwork practices came to light.

There are close to 2 million homes in the late stages of delinquency, according to Lender Processing Services. Since foreclosed properties often sell below market value, they can wreak havoc on home prices.

Converting these homes to rentals can both help the neighborhood and minimize losses to Fannie, Freddie and the FHA, which hold about 250,000 properties, Bernanke told lawmakers last week.

He urged lawmakers to ramp up their efforts to fix the housing market, placing particular emphasis on the problem of vacant homes on the market.

"Restoring the health of the housing market is a necessary part of a broader strategy for economic recovery," he said.

Bernanke's comments launched a full-court press by Federal Reserve officials last week to raise awareness of the continuing problems plaguing the housing market.

His proposals were quickly followed by Fed Governors Sarah Bloom Raskin, who spoke on ramping up enforcement of mortgage servicers, and Elizabeth Duke, who said Fannie Mae and Freddie Mac could do more to help heal the housing market.

Meanwhile, New York Fed President William Dudley gave a speech that touched on a wide range of housing policies -- including principal reduction and mortgage refinancing -- that he believes will boost the economy.

The Fed has already tried to boost real estate sales by pushing mortgage rates down to record lows through massive bond-buying programs.

But the renewed push for housing help indicates that the Fed, which has basically run out of monetary policy ammunition to revive the real estate market, is urging the federal government to ramp up its efforts.

"The Federal Reserve is signaling in even stronger terms the need for the government to do more to help housing," said Jaret Seiberg, a policy analyst with the Washington Research Group. To top of page

How can you profit from the housing growth in Denver

by Roberts Johnson and Rachel Diedrich, Real Estate B

This was aired on Fox 31 in Denver and it really hits home for investors and 1st time home buyer's.

Call or email to discuss

[email protected]


New Home Builders call Denver a Sweet Spot

by Roberts Johnson and Rachel Diedrich, Real Estate B

For the first time in years, builders have something to smile about in the coming market; Denver's a 'sweet spot'

Posted: 01/06/2012 01:00:00 AM
By Mark Samuelson

Oakwood Homes President Pat Hamill shows his new Fairway Villas models at Green Valley Ranch Golf Club. Designed for 55-and-older buyers, they re bringing us unbelievable traffic, he said.

Builder Dave Mandarich, with 35 business years and 167,000 homes behind him, is putting a pencil to Colorado's indicators for 2012 and likes what he sees. "People are more confident," he said from Richmond American's headquarters in the Denver Tech Center. "They really don't want to be renters, they're feeling better about jobs, and rates are at a career low." Adding those up, Richmond American is launching a new model series -- and opening the throttles a little at master-planned locations such as Banning Lewis Ranch near Colorado Springs.

With lots of depth in markets that are bigger than Colorado's even in a bad year, Richmond American is sensing a "sweet spot" here - and other builders are nodding their heads in

Richmond American Homes American Dream collection will be priced from $199,950, with a large bedroom count and lots of standard features, including granite

"We're fortunate having a market that's stabilized," says Pat Hamill, whose Oakwood Homes ranks third behind Richmond in total sales, but is Colorado's largest privately-held builder and highest seller-per-community. That includes Thompson River Ranch, a master-plan in Loveland's I-25/Centerra corridor, which Hamill says is top-seller in northern Colorado, benefitting from new NASA jobs and other arrivals.

"The whole housing market got the swine flu," Hamill reflected; "but now local markets are emerging. We're seeing lower inventory, net in-migration of around 38,000 (in Denver metro), and huge positive job growth -- the first in four years. Consumer indices show people are starting to feel better."

In addition to some job growth, all builders are focused on the favorable inventory side - down drastically over 2010 according to market analyst Jack O'Connor with The Denver 100, whose latest report shows metro Denver's 8,854 active homes-for-sale as having dropped a whopping 36.5% over the year. They're also, adds Hamill, noting the fact that the so many builder-competitors disappeared during that four-year drought - around 40% to 45% of the competing market, he says.

For Oakwood, that's expected to render around 40% more sales in 2012, showcased from nine new communities Hamill expects to open (a few will also close as they reach sell-out). But while Richmond's Mandarich sees the best opportunities at the low end where inventory is lowest (his new American Dream series is priced from just $199,950), Hamill and other builders are watching for openings in the pricier move-up and move-down product ranges, as well.

"We view re-sales as our primary competition," says David Bracht, Lennar's Colorado Division president, adding that many homes for sale in the supply-side have terrible energy bills and other deficiencies that could eventually cost a buyer between $10,000 and $30,000 in remediation. "We're trying to have homes available for anybody in the market," Bracht added. That includes in Denver's Southeast corridor, where Lennar is feeling good about its offerings that edge into the $300,000 to $500,000 range, many with upgrades such as hardwood floors, fancier cabinets and smart-home features included in the price.

Dan Nickless, president of Ryland's Colorado division agrees, showing new offerings around Boulder-Louisville, northern Colorado, and Castle Rock. "Some of the inventory you see out there are marginal properties. The more people can move from their existing properties, the more that gives them the opportunity to get into a new home, with a more livable floorplan as well as more energy efficiency."

Mark Samuelson writes on real estate and business; you can email him at [email protected]

Read more: For the first time in years, builders have something to smile about in the coming market; Denver's a 'sweet spot' - The Denver Post
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FHA Waives Anit-Flipping Rule

by Roberts Johnson and Rachel Diedrich, Real Estate B

FHA Waives Anti-Flipping Rule Through Year-End to Speed REO Sales


The Federal Housing Administration (FHA) is extending the temporary waiver of its property anti-flipping rule through the end of 2012.

FHA rules typically prohibit insuring a mortgage on a home owned by the seller for less than 90 days. In 2010, however, the agency waived this regulation, and later extended the waiver through 2011.

The new extension announced late last week will permit buyers to continue to use FHA-insured financing to purchase HUD-owned and bank-owned properties, no matter how long the homeowner has held the title, through December 31, 2012.

FHA says the waiver will allow homes to resell as quickly as possible, helping to stabilize real estate prices and revitalize communities experiencing high foreclosure activity.

“This extension is intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight,” said Carol Galante, FHA’s Acting Commissioner. “FHA remains a critical source of mortgage financing and

stability and we must make every effort that to promote recovery in every responsible way we can.”

According to FHA, the waiver contains strict conditions and guidelines to prevent the predatory practice of property flipping, in which properties are quickly resold at inflated prices to unsuspecting borrowers.

Among these conditions, all transactions must be arms-length, with no link between the buying and selling parties.

In addition, in cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will apply only if the lender meets specific conditions, and documents the justification for the increase in value.

FHA’s property-flipping waiver is limited to forward mortgages, and does not apply to the agency’s Home Equity Conversion Mortgage (HECM) for purchase program.

Since the original waiver went into effect on February 1, 2010, FHA has insured nearly 42,000 mortgages worth more than $7 billion on properties resold within 90 days of acquisition.

The agency says its own research has found that in today’s market, acquiring, rehabilitating, and reselling foreclosed properties to prospective homeowners often takes less than 90 days.

As a result, FHA says prohibiting the use of its mortgage insurance for a subsequent resale within 90 days would adversely impact the willingness of sellers to consider offers from potential FHA buyers, namely because they would be required to cover holding costs and the risk of vandalism that comes with allowing a property to sit vacant over a 90-day period of time.


Year Ends Up!

by Roberts Johnson and Rachel Diedrich, Real Estate B

Stock market closes up 135 points on new-home deals and job growth prospects

Posted: 12/30/2011 01:00:00 AM MST
Updated: 12/30/2011 02:59:32 AM
By Pallavi Gogoi
The Associated Press


NEW YORK — Better news on home sales and improved prospects for job growth sent stocks higher on Wall Street on Thursday.

The Dow Jones industrial average rose 136 points, nearly making up its 140-point loss from the day before. The Standard & Poor's 500 edged back into the black for 2011 with one more day of trading left in the year.

The four-week average of unemployment claims fell to a 3 1/2-year low, an indication that hiring could pick up. Also, the number of Americans who signed contracts to buy homes in November rose more than 7 percent to the highest level in a year and a half, according to the National Association of Realtors.

Quincy Krosby, Prudential Financial's market strategist, said the reports were encouraging signals for the economy going into 2012.

"The correlation between jobs and housing has been crystal-clear this year," Krosby said. "Parts of the country where jobs are more plentiful are the ones where the housing market has held up."

Krosby said the correlation has become more pronounced after the real-estate bust, when lenders became reluctant to even consider customers for a mortgage unless they held jobs. She said it's a noticeable trend in many cities nationwide.

The positive housing news sent the stocks of homebuilders sharply higher. Masco soared 8.4 percent, the most in the S&P 500. Pulte Group rose 6 percent, and Lennar gained 4.6 percent.

The Dow closed at 12,287.04, a gain of 135.63 points, or 1.1 percent. For the year, the Dow is up 709 points, or 6 percent.

The S&P 500 rose 13.38 points, or 1.1 percent, to 1,263.02. That's five points above where the index started the year.

The technology-heavy Nasdaq composite rose 23.76 points, or 0.9 percent, to 2,613.74. The index is down 39 points for the year.

Trading was very light as investors get ready to close the books on 2011. Markets are closed Monday in observance of New Year's Day, which falls on Sunday.

The euro went as low as $1.28 against the dollar, its weakest since September 2010. The euro also fell to its lowest against the Japanese yen in a decade.

Investors continued to be worried that Italy's 10-year borrowing rate remains uncomfortably close to 7 percent, a level that economists consider unsustainable. Greece, Ireland and Portugal all had to seek relief from their creditors after their 10-year bond yields rose above 7 percent.

Read more: Stock market closes up 135 points on new-home deals and job growth prospects - The Denver Post
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Displaying blog entries 1-5 of 5

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