Insightful thoughts on Florida Real Estate

Posted on July 17th, 2012
by Greg Ellingson

Important Insurance Tips for First Time Homebuyers

First time homebuyers should take a look at these tips before buying property insurance.

CHICAGO – July 16, 2012 – Property insurance is confusing. At a minimum, new buyers should understand the levels and types of coverage, and take a few additional steps to protect themselves.

1. Know the difference between replacement cost and market value. Rebuilding a home is usually cheaper than buying an existing structure, unless the property was a foreclosure. The key: Accurately determine the cost of rebuilding when finalizing the details on a homeowners insurance policy.

2. Take a home inventory to determine the proper amount of personal property protection. Generally, policies cover 50-75 percent of the replacement value of the house. However, this may not be enough to cover certain valuables, such as jewelry, fine art, collections, electronics and other expensive items. A separate rider may be needed and should be discussed with an insurance agent.

3. Have enough liability protection. Liability coverage protects a homeowner if they’re sued for an injury that takes place on their property. Many policies will even cover a policyholder if an incident happened away from the house. Depending on their assets, some homeowners might want an additional umbrella policy if they’re worried about being sued for more than the liability coverage offered in their basic policy.

4. Know what isn’t covered. Carefully study the exclusions section of a homeowners insurance policy. If anything raises a red flag, consider additional coverage. One example: Almost no insurance policy covers flooding. If a homeowner lives in an area prone to flooding, he or she might want to consider flood insurance too.

5. Consider additional living expenses if forced from the house. If a house becomes unlivable due to a flood, earthquake, fire or other disasters, a family will need to pay for living accommodations; and they may need additional money for food, transportation and other expenses. This coverage is “additional living expenses” (ALE) and a benefit that’s usually worth about 20 percent of a home’s replacement value. Be aware of the specific policy’s benefits, limitations and exclusion.

When shopping for home insurance quotes, find a company that is financially stable and has a high customer satisfaction rating. Two resources to check these qualities are A.M. Best for financial strength ratings and J.D. Power and Associates for their annual customer service rankings, according to, a website that connects homeowners with agents.

© 2012 Florida Realtors®

Posted on July 16th, 2012
by Greg Ellingson

Many Analysts Say the Housing Crisis has Come to an End

A majority of analysts surveyed by the Wall Street Journal believe the housing market has hit its bottom, forecasting a rise in housing prices.

NEW YORK – July 13, 2012 – It’s official: The housing market has reached bottom, at least according to 44 forecasters surveyed by The Wall Street Journal. Only three economists surveyed said they didn’t think the market had reached bottom yet.

The recent momentum in housing has plenty of economists and forecasters convinced that the worst is behind. According to many real estate indices, home prices are up, sales of existing and new homes are picking up year-over-year, and inventories of for-sale homes have fallen dramatically.

The decrease in for-sale inventory is the key and will likely help maintain the rise in home prices, said Mark Fleming, CoreLogic chief economist.

What’s more, the number of vacant homes is at its lowest point since 2006, The Wall Street Journal reports.

While the “bottom” may have been reached, however, economists admit there’s still a long way to go for a full recovery. In particular, more than one in every four homeowners with mortgages are still underwater, owing more on their loan than their home is currently worth. However, analysts note that rising home prices are chipping away at that number. Also, shadow inventory of unsold homes and foreclosures still threaten the momentum of the recovery as well.

“From here on, housing is unlikely to drag the U.S. economy down further,” JPMorgan Chase economists note. “It will instead reflect the strength or weakness of the overall economy: The more jobs, the more confident Americans are about keeping their jobs, the more they are willing to buy houses.”

Source: “Housing Passes a Milestone,” The Wall Street Journal (July 11, 2012)

© Copyright 2012 INFORMATION, INC.

Posted on July 13th, 2012
by Greg Ellingson

Swell of Newly Foreclosed Properties Expected on the Market by Early Next Year

Banks across the nation have been placing more and more homes with unpaid mortgages on a foreclosure countdown; many newly foreclosed properties are expected on the market by the beginning of 2013.

LOS ANGELES (AP) – July 12, 2012 – Banks are increasingly placing homes with unpaid mortgages on a countdown that could deliver a swell of new foreclosed properties onto the market by early next year, potentially weighing further on home values.

June provided the latest evidence of this trend, as the number of U.S. homes entering the foreclosure process for the first time increased on an annual basis for the second month in a row, foreclosure listing firm RealtyTrac Inc. said Thursday.

California in particular saw a big spike in foreclosure starts, or homes placed on the foreclosure path for the first time. They increased 18 percent versus June last year, the firm said.

The increase in foreclosure starts comes as banks make up for time lost last year as the mortgage-lending industry grappled with allegations that it had processed foreclosures without verifying documents.

The nation’s biggest mortgage lenders reached a $25 billion settlement in February with state officials. And that’s cleared the way for banks to address their backlog of unpaid mortgages.

Lenders initiated foreclosure on 12 percent of the loans behind in payment in June – the highest level since the first half of 2009, according to Fitch Ratings.

“These properties that are starting the foreclosure process are mostly homeowners who likely have been missing their payments for a year or more and just now are officially starting the foreclosure process,” said Daren Blomquist, a vice president at RealtyTrac.

That means the latest crop of homes entering the foreclosure process does not signal that there is a fresh wave of homeowners in distress and missing payments.

Still, the increase in foreclosure starts sets the stage for a potential increase in homes sold at a discount via short sale, when the lender agrees to accept less than what is owed on the seller’s mortgage. Others could end up taken back by banks and placed on the market also at a sharp discount.

Either way, short of homeowners obtaining loan modifications or otherwise arranging to exit the foreclosure process, many of these properties could end up adding to the inventory of foreclosed homes on the market, dragging down the values of nearby homes.

Those homes may not hit the market for many months, however.

In the second quarter, it took an average of 378 days for a U.S. home to complete the foreclosure process, or the point when a bank takes over the property, RealtyTrac said. That’s up from an average of 370 days in the first three months of the year and a record going back to the first quarter of 2007, the firm said.

In New York, it took an average of 1,001 days for the foreclosure process to run its course in the second quarter, down from 1,056 days in the first quarter.

Of the homes that entered the foreclosure process in June, those that end up as bank-owned properties would likely hit the market a year from now, Blomquist said.

“However, if they take the short sale route, it may be sooner,” he said.

Short sales take, on average, 319 days to sell from the time they enter foreclosure.

A stronger housing market could mitigate the impact of future foreclosures on home prices, and home sales are expected to end up ahead of last year. But many economists still say the market is years away from a full recovery.

There are some 3 million U.S. homes behind on their mortgages, according to the Mortgage Bankers Association.

An additional 629,000 homes were on banks’ books as of June, but not yet sold. That translates into a 15-month supply, at the current pace of sales, according to RealtyTrac.

And nearly 13 million home loans are underwater, or owing more than the house is worth. Those properties could be at higher risk for entering the foreclosure process.

Even so, the backlog in foreclosures that banks are still dealing with has slowed the pace of home repossessions.

RealtyTrac forecasts some 700,000 homes will be repossessed by lenders this year, down from about 1 million last year.
Copyright © 2012 The Associated Press

Posted on July 12th, 2012
by Greg Ellingson

LexisNexis Reports Decline in Fraud Involving Real Estate Professionals, Increase in “Collusion”

LexisNexis has reported an increase in "collusion," or mortgage fraud between buyers and sellers.  Furthermore, Florida ranks third in the nation for mortgage fraud investigations.

NEW YORK – July 11, 2012 – The LexisNexis Annual Mortgage Fraud Report for 2012 finds that the number of real estate professionals involved in mortgage fraud declined, but there over the past three years, there has been an increase in fraud that involves only buyers and sellers, called “collusion” in the report.

Based on incident reports submitted by LexisNexis’ MIDEX subscribers, collusion between mortgage industry professionals was fairly constant before 2009 – about 5 percent of all loan originations. It rose to 7 percent of loans originated in 2009 and 9.7 percent in 2010. Last year it dropped to 6.8 percent.

LexisNexis also uses its data to create a Mortgage Fraud Index (MFI) that ranks states on the incidence of fraud, both investigations and loan originations.

For 2011, Florida headed the list as the state with the highest MFI for investigations, followed by Nevada, Arizona, Michigan and Rhode Island. In mortgage originations, Florida ranked third. New Jersey and Colorado topped the list, and Michigan and California ranked fourth and fifth.

LexisNexis also looked at mortgage fraud by metropolitan statistical area (MSA), which includes large blocks of populated areas and generally more than one city. By MSA, Miami-Fort Lauderdale ranked No. 3 nationally for mortgage fraud, impacting 7 percent of originations. Los Angeles-Riverside-Orange County, Calif., with 16 percent fraud, ranked first, followed by New York-Northern New Jersey-Long Island with 11 percent fraud.

“Increased levels of fraud and misrepresentation in the foreclosure, short sale and real estate-owned worlds have pushed the issue of collusion to the forefront,” says Tom Brown, senior vice president, Financial Services, LexisNexis. “These complex schemes are coming under increased scrutiny and investigators need to pay attention to all parties and relationships in non-arm’s length transactions.”

Collusion Indicator Index

For the first time, LexisNexis released a Collusion Indicator Index (CII) to help lenders pinpoint the areas where buyer and seller collusion occurs. Many times, collusion involves “a potential relationship between the buyer and seller, particularly when a property has been transferred at a significant loss between relatives and known associates.”

The CII ranks states and using an analysis of deed transfers. For 2011, Alabama, New York, Kentucky, Pennsylvania and Indiana ranked first through fifth on the Collusion Indicator Index for properties experiencing a 20-95 percent decrease in sales price.

“Just as the financial world failed to realize the impact of fraud for profit until significant damage was done, the mortgage industry is now waking up to increased instances of collusion,” says Tim Coyle, senior director, Financial Services, LexisNexis. “Unfortunately, this has become the ‘new normal’ in the mortgage industry.”

The full report and previous years’ reports are available on the LexisNexis website.

© 2012 Florida Realtors®

Posted on July 11th, 2012
by Greg Ellingson

Federal Housing Administration Records Continual Increase in Number of Delinquent Borrowers

Although the mortgage market has begun to improve, the FHA still reports an increase in the number or serious delinquencies and foreclosures.

WASHINGTON – July 10, 2012 – At a time when the mortgage market is seeing steady signs of improvement, loans backed by the Federal Housing Administration (FHA) continue to see an increase in the number of borrowers seriously delinquent on their mortgage and falling into foreclosure, according to a new quarterly report issued by the Office of the Comptroller of the Currency.

For the year ending March 31, FHA-backed loans 90 days or more delinquent increased nearly 27 percent, while foreclosures went up nearly 17 percent. Meanwhile, bank loans saw delinquencies decrease by 39 percent and foreclosures fall nearly 10 percent.

FHA-backed loans tend to be attractive to first-time homebuyers since they offer low 3.5 percent downpayments, and require lower credit scores and incomes to qualify. The low downpayment requirement with FHA-backed loans, however, means that borrowers have less cushion if their property drops in value, and they can quickly find themselves underwater on their mortgage, housing experts say.

The share of FHA-backed loans in the mortgage market has drastically increased in recent years. And housing analysts warn of more FHA loan delinquencies over the next few years if the economy doesn’t improve, Inside Mortgage Finance publisher Guy Cecala told CNNMoney.

However, FHA says it has been trying to offset losses in recent months by increasing its insurance premiums, ramping up its requirements for minimum credit scores of its borrowers, requiring larger downpayments for any borrowers with credit scores below 580, and prohibiting home sellers from helping borrowers with the downpayment.

“We expect the new books will continue with their better performance, primarily because of the steps that were put in place,” FHA officials told CNNMoney. “And we are benefiting from having more high-credit borrowers.”

Source: “Closer to Bailout? FHA’s Mortgage Delinquencies Soar,” CNNMoney (July 9, 2012)

© Copyright 2012 INFORMATION, INC. 

Posted on July 10th, 2012
by Greg Ellingson

Consumer Financial Protection Bureau Plans to Improve Fairness of Mortgage Application Process

The Consumer Financial Protection Bureau is preparing to implement measures that will revamp the mortgage market by clarifying the application process.

WASHINGTON – July 9, 2012 – The Consumer Financial Protection Bureau says it’s planning for some major changes to the home mortgage market in the next six months. Its main goal: to improve the fairness and clarity for borrowers applying for home mortgages.

The newly created agency has made the mortgage market its top agenda item.

“It’s the market where consumers have the most at risk, and they have the most at stake,” Richard Cordray, the bureau’s director, told The New York Times. “I expect that the mortgage market in the fairly near term will look different in the sense that, first of all, it will be a clearer and more straightforward place for consumers; and second, it will be a more reliable market.”

As a first step, the agency says it will propose new lender rules later this summer for revising “good faith estimate” forms, the forms which homebuyers receive before closing that lists borrowers’ costs. The agency wants the forms to clearly state the interest rate on the loan that borrowers will pay, how this rate potentially could change over the term of the loan, and exactly how much cash they’ll need at closing.

The agency says the changes will help make often-confusing forms more understandable and complete for buyers.

The agency also has plans to overhaul how mortgage servicers provide services to borrowers facing foreclosure, requiring clearer information and improved service options.

“If we do all of those things from beginning to end, I think the mortgage process will work better,” Cordray said. “And that’s good for the economy.”

Source: “New Agency Plans to Make Over Mortgage Market,” The New York Times (July 5, 2012)

© Copyright 2012 INFORMATION, INC.

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