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Mortgage Rates Could Spike as Federal Reserve Program Expires By Alan J. Heavens Print Article RISMEDIA, March 20, 2010(MCT)As the spring real estate season kicks in and the tax credit deadline for sale agreements approaches, the government is ending a program that has kept interest rates low and housing-affordability levels high for months. On March 31, the Federal Reserve will stop buying mortgage-backed securities from Fannie Mae and Freddie Mac, returning control of interest rates to private investors. For months, industry observers have predicted that once government supports are removed, interest rates will rise quickly, pushing many of the first-time buyers critical to housings recovery out of the market. In late summer and fall 2009, lured by fixed 30-year mortgage rates under 5% and the first $8,000 tax credit, which expired Nov. 30, first-timers pushed sales of previously owned homes to the highest levels in at least three years, reducing record inventories and braking price declines. That tax credit was renewed Nov. 5 and expanded to buyers who had not purchased a property in five years, although the credit for repeat buyers is $6,500. The second credit expires April 30, is unlikely to be renewed, and remains the engine moving buyers. Not a single one has expressed concern about interest rates, said Cheryl Miller of Long&Foster Real Estate in Blue Bell, Pa., acknowledging that there is, I suppose, a false sense of security regarding rates remaining low. As the date for the Fed pullout approaches, analysts now generally agree that an immediate rate spike is no longer the likely result. We think there will be a significant increase in private demand for mortgage-backed securities to take the place of the Fed, said David Berson, chief economist at PMI Group in Walnut Creek, Calif. Not enough to offset the Feds departure, he said, with rates possibly increasing a quarter of a percentage point, but a significant one. Bankrate.com columnist Holden Lewis said rates are so low nowaveraging 4.87% for a 30-year fixed this weekthat an increase is inevitable. But maybe theyll rise gradually instead of jumping April 1. The Fed says it will stop buying by March 31 instead of at the end of the month, meaning that it likely has reduced its purchases and rates havent risen, Lewis said. Moodys Economy.com chief economist Mark Zandi said rates will drift higher in summer and fall, with the half a percentage point the Feds action cut working its way back inmainly because investors believe the government would return if they got too high. For that reason, Philadelphia mortgage broker Fred Glick said, rates wont change. If the old buyers dont come back, the Fed will intercede again to ensure rates during a continued slowly recovering economy will not go so high as to stymie a positive direction, Glick said. Buyers of these securities now see that the lenders have instituted rigorous standards to ensure that the Fannie Mae and Freddie Mac paper they are buying are very good loans, he said. On the other hand, said Holland, Pa.-based economist Joel L. Naroff, low rates are not sustainable, and the only way to get the market to stand on its own is to get people to become realistic again about prices and rates. Rates will likely rise, but the level will still be historically low, Naroff said. When rates do rise, likely by years end, it wont be because of the Feds action, but natural macroeconomic forces like a recovering economy and the high budget deficit, said Lawrence Yun, National Association of Realtors chief economist. The possibility of renewed Fed intervention will likely prevent rate increases resulting from private investors demanding large risk spreads, said economist Brian Bethune of IHS Global Insight in Lexington, Mass. As a result, Bethune and IHS economist Patrick Newport believe, the rate will be at only 5.25% by the fourth quarter. Many Fed officials have emphasized that high unemployment and tame inflation warrant a continued promise to hold rates very low for a long time, said Peter Buchsbaum, of Arlington Capital Mortgage in Horsham, Pa. Some analysts expect the expansion to ease, and I am sure the Fed does not want to extinguish the fragile recovery, Buchsbaum said. Treasury bond yields did not move much after the Fed completed its $300 billion in purchases in November, said Jerome Scarpello, of Leo Mortgage in Spring House, Pa., meaning they were able to exit and not disrupt that market. Rates will rise, he said, but not as high as the one percentage point others predict. With unemployment high and foreclosures an issue, a significant rate increase can push home prices down, Scarpello said, and hamper the slight recovery we now have.
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RISMEDIA, March 20, 2010(MCT)Its been 16 months since Eugene and Patricia Harrison last paid the mortgage on their Perris, Calif., home. Eleven months since the notice got slapped on their front door, warning that it would be sold at auction. A terse letter from a lawyer came eight months ago, telling them that their lender now owned the house. Three months later, the bank told them to pay up or get out by the end of the week. Still, they remain in the yellow ranch-style home they bought seven years ago for $128,000, with its views of the San Jacinto Mountains. Theyre not planning on going anywhere. Were kind of on pins and needles, but whod want to leave when you put this kind of energy into a house? said Eugene Harrison, gesturing toward a bucolic mural of mountains, stream and flowers the couple painted on the living room wall. Throughout the country, people continue to default on their home loansbut lenders have backed off on forced evictions, allowing many to remain in their homes, essentially rent-free. Several factors are driving the trend, industry experts say, including government pressure on banks to modify loans and keep people in their homes. And with a glut of inventory in places like Southern Californias Inland Empire, Nevada and Arizona, lenders are loath to depress housing prices further by dumping more properties into a weak market.
Finally, allowing borrowers to stay in their homes helps protect the banks investment as it negotiates with the homeowners, said Gary Kirshner, a spokesman for Chase bank, a major lender. If the persons in the property, theres less chance for vandalism, and theyre probably maintaining the house, he said.Economists say the situation wont last forever, but in the meantime the amnesty may allow at least some homeowners to regain their financial footing and avoid eviction. In the Inland Empire, an estimated 100,000 homeowners are living rent-free, according to economist John Husing, who based that number on the difference between loan delinquencies and foreclosures. Industry experts say its difficult to say how many families are in that situation nationally because only banks know for sure how many customers have stopped paying entirely. But Rick Sharga of Irvine, Calif., data tracker RealtyTrac notes that the number of loans in which the borrower hasnt made a payment in 90 days or more but is not in foreclosure is at 5.1% nationally, a record high. And yet the number of foreclosures last year was 2.9 million, below the 3.2 million that RealtyTrac economists predicted. More evidence is provided by another firm, ForeclosureRadar, which says it now takes an average of 229 days for a bank to foreclose on a home in California after sending a notice of default, up from 146 days in August 2008. For some reason, banks are being more lenient with homeowners who are behind on their loans, Sharga said. Whether its a strategy to try and slow down the volume of foreclosures or simply a matter of the banks being able to keep up with volume is something that banks only know for sure. Lenders say the trend reflects their efforts to work with borrowers to modify loans to avoid foreclosure. Bank of America continues to exhaust every possible option to qualify customers for modification or other solutions, spokeswoman Jumana Bauwens said. Some lenders are making it a policy to partner with delinquent borrowers. Citibank said this month that it would let borrowers on the brink of foreclosure stay at their homes for six months, whether or not they make payments, if they turn over their property deed. Such policies may partly reflect the fact that lenders cant keep up with all the foreclosures, some say. The mortgage lenders are so backlogged that some people are able to slip through the cracks, said Kathryn Davis, a real estate agent at Americas Real Estate Advocates in Corona. That was apparently the case for the Harrisons, who were told at various times that their house had been sold, that it beloned to someone else and that it was empty. Its been frustrating, said Eugene Harrison. The Harrisons missed their first payment in October 2008, shortly after Patricia Harrison lost her job as a healthcare aide and her husbands part-time towing work dried up. They said they applied for a loan modification but were told that they couldnt receive one until they were three months behind on their payments. So they stopped paying. In April 2009, they received a notice warning them that their property may be sold at a public sale, and in July, they were told their house was a bank-owned property. The bank sent a notice by FedEx in October demanding $3,000, and when the Harrisons called to discuss this notice, they were told they had four days to vacate the house. Panicked, they arranged to stay with family in New Mexico and started packing their things, filling their garage with boxes of books, camping equipment and art. But no one came to kick them out. We were afraid to leave the house, afraid the sheriff was going to come, said Patricia. After contacting consumer advocates about their situation, the Harrisons decided to stay put. Soon after, two men in a white pickup truck showed up at the house and peeped in the windows, telling the Harrisons that they thought the house was abandoned. The Harrisons suspected they were planning to move in themselves and chased them away. As they wade through the red tape, the Harrisons cant imagine abandoning a house where theyve left their mark in the goldenrod and potpourri rose walls, the new fixtures and stenciling in the bathrooms, the fruit trees planted in the yard. Although the Harrisons future is uncertain, industry observers agree that the rent-free life cant last forever. As home values climb, banks will find it financially advantageous to foreclose on delinquent borrowers and sell their properties. In many cases, particularly in California, people owe a boatload of payments, and no bank is going to forgive that, said Guy Cecala, editor of Inside Mortgage Finance, a trade publication. In Diamond Bar, the Fraguere family is finally moving on after living rent-free for 18 months. Job loss and other setbacks prevented them from paying their mortgage, but they say they didnt hear anything from the bank until a real estate agent showed up at their door last month saying she was going to sell their house. Sandy Fraguere wasnt surprised that it had taken the bank so long to ask them to move. I dont think they really knew what was going on or who was there, she said. Next stop for the Fragueres is a hotel, where they plan to stay for two weeks until their apartment in Chino Hills is ready for them to move in. Their dogs are being boarded and their belongings stored until they can retrieve them someday. The Fragueres have started saying goodbye to their neighbors, adding yet another empty house to a block that has already seen two other families forced to pack up and leave.
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By Jean Patteson  RISMEDIA, March 19, 2010(MCT)Want to sell your home? Get out the bucket, mop and Mr. Clean. The key to making a positive first impression is simple, said Sandra Rinomato, host of HGTVs popular Property Virgins show.
Get it clean, clean, clean, said Rinomato. If your house isnt clean, it instantly sends up negative thoughts that the home is not well maintained. If your house is spotless, youre ahead of the game, she said. But dont stop there, advised Rinomato. To increase your chances of making a sale, stage the house to make it as attractive as possible. Until recently, Staging meant pulling out all the stopssetting the dining table with your best china and crystal, arranging flowers, lighting candles, she said. Now we take the minimalist approach. Basically, you want to strip the house to its bare essentials, depersonalize it so potential buyers can superimpose themselves and their lifestyle on the house. Rinomato offered the following tips for staging a home: 1. Visit model homes and examine shelter magazines for inexpensive decorating ideas. Always keep in mind you are not decorating for yourself but for the general public. 2. Start with the outside. Give the house a fresh coat of paint, add shiny hardware to the front door and plant a few flowers to send a subliminal message the house is loved and well cared for. 3. Declutter every room to make it look larger. Get rid of family pictures, trophies and knickknacks. Closets and drawers should be no more than 30% full. 4. Invest in eco-friendly but bright lights. Open the drapes or remove them completely. Light, bright rooms give the impression this is a happy placeand everyone wants to move into a happy place, said Rinomato. 5. Feature only a few pieces of furniture with mainstream appeal. Pull pieces away from walls to make rooms look bigger. 6. Make sure a rooms primary use is obvious. A bedroom should look like a bedroom, not an office, hobby center or gym. 7. Bedrooms and kitchens are difficult to stage because they are in daily use, but make the effort. Clear everything off the counters and nightstands, roll up the rugs and hide the laundry hamper. Buff the cabinets with car wax and clean under the sinks. Invest in pristine white bed linens and towels. 8. Minimize the pet effect. Remove food bowls and litter boxes to the utility room. Deodorize thoroughly. 9. Organize the utility room and garage. Hang up the bicycles, roll up the hose. Renting a storage locker is worth the cost if it helps you sell faster and for a higher price. 10. Once your house is staged, invite your friends or Realtor over and walk them through to get an objective opinion.
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5 Tips for a Successful Home Remodel  RISMEDIA, March 12, 2010As spring approaches, many homeowners grow eager to start remodeling projects to update and refresh their surroundings. Before getting started, its a good idea to hire a professional remodeler for a workable plan and better results, according to the National Association of Home Builders (NAHB).
A professional remodeler knows how to translate a homeowners dreams and budget into a beautiful reality, said Donna Shirey, CGR, CAPS, CGP, president of Shirey Contracting in Issaquah, Wash. and 2010 chairman of NAHB Remodelers. They have the expertise and skills to satisfy a customer while keeping the budget in check. Here are five tips for planning a successful home remodel that you can enjoy for many years to come. 1. Compile a list of home remodeling ideas and draft a budget for the work.
You likely have some projects in mind, such as modernizing the bathroom, renovating the kitchen, replacing windows or repairing the roof. Prioritize your wish list: Maybe you dont have the budget for your dream remodel, but professional remodelers can maximize your dollars by doing the work in phases, suggesting budget-friendly products and materials and implementing creative design solutions. 2. Look for a professional remodeler to help plan the project.
Start by searching NAHBs Directory of Professional Remodelers at www.nahb.org/remodel. Youll get a list of nearby remodelers to contact. Asking friends and neighbors for names of qualified remodelers will also help you find a match for your project. 3. Check the references and background of the remodeler.
After you start speaking with remodelers and find one or two who match your projects needs, be sure to conduct some background research by checking with the Better Business Bureau, talking to their references and asking if they are a trade association member (such as NAHB Remodelers). Remodelers with these qualities tend to be more reliable, better educated and more likely to stay on top of construction and design trends. 4. Agree on a contract.
Talk over the details of the home remodeling project and begin reviewing the contract. Youll want to check the remodelers insurance coverage, ask about any warranties on their work, know who is responsible for obtaining any building permits and understand the process for making any change orders after the contract is signed. Make sure that you and your remodeler see eye to eye before you sign on the dotted line. 5. Take advantage of the energy efficiency tax credits.
If your remodel includes replacing windows or doors, adding insulation, installing new roofing, upgrading heating or air-conditioning units, updating the water heater or installing energy generating products (such as solar panels, heat pumps or wind turbines) then you can take advantage of federal energy efficiency tax credits through 2010 that will help defray costs and maximize your remodeling budget while reducing home energy bills.
For more information, visit www.nahb.org. RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com. For more top headlines on RISMedia.com, be sure to see:
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