What’s next when a homeowner starts the downhill slide into foreclosure? I mean, what is the reality of the help that is supposedly available from the federal government?

HUD has two programs: FHA Secure and HOPE for Homeowners Act. Here’s a link to all the information - http://www.hud.gov/news/fhasecure.cfm

FHA Secure is a program offering new mortgages originating at private lenders for homeowners who have been late only 3 times or less in the past 12 months making payments on their non-FHA ARM, and who have at least 3% equity at their home’s present value.

HOPE for Homeowners Act of 2008, just part of the new legislation passed to ease the housing crisis, is designed to help borrowers who have already defaulted on their mortgages obtain new, 30-yr fixed loans. Even if the homeowner owes more than the home is currently worth (that’s called “being underwater”… it’s getting crowded down there…) for three years, starting Oct 1, 2008, homeowners may apply for new 90% LTV loans as long as certain criteria are met. Also, lenders may or may not choose to participate in this program, it’s not mandatory. A lender has to decide whether or not to forgive a percentage of a borrower’s outstanding debt in order to avoid repossessing a property.

Mortgage loan criteria at private lenders has tightened debt to income ratios to about 40% instead of 60%, and LTV ratios to 80% instead of 100%.

Times is tough.

Some call it a silver lining… I call it a market economy. New housing starts are at a 17-yr low because new construction is competing with a huge inventory of used houses for sale, and qualified buyers are simply waiting around to see what will happen to prices tomorrow. Oh, and there are also fewer qualified buyers than there used to be.

The National Assn of Home Builders is looking for every bit of good news it can find, and this week it released data indicating the families earning at least $61,000 (the national median income) can afford more than half of the houses currently available on the market.

“Homes became more affordable because median income and interest rates remained about the same throughout the country, as home prices continued to fall,” said Gopal Ahluwalia, an NAHB economist.

Median home prices dropped to $215,000 in the first quarter of 2008, which are about 10% below year-ago levels of $240,000, according to NAHB. Obviously, median prices and income figures are not necessarily relevant in our local areas since median just sets a mark for prices and incomes in the middle. But I’m wondering how that median family making $61,000 can afford that median home costing $215,000. I’m not sure they can…

Surprise! Turns out, as more and more vacationers are looking to economize rather than abandon their travel plans, they’re looking around to rent privately-owned cabins, condos and homes costing less than resort hotels. The trend is most noticible in areas within driving range of large metro areas such as Las Vegas, New York and Palm Springs.

Experts are recommending placing online ads with good photos, and even offering incentives (local restaurant coupons, marina credit, etc.) to attract renters. These suggestions are aimed at investors who already own vacation property and who are willing to take a hands-on approach to property management.

Foreign travelers are more likely to find a property on subscription-based online services, while “locals” are surfing craigslist.org and hotpads.com as well as local posting boards.

The news of foreclosure filings, up 55% from this time last year, leaves a lot unsaid.  

One thing that is not often mentioned is that percentages like the one in the previous sentence are usually a national average, meaning some regions are a whole lot worse off and others are not so bad.

Picking through a thick page of statistics released by RealtyTrac data service today, I notice that one in every 106 households in Nevada is listed in some type of filing in public records in the month of July 2008, while one in 64 households are listed as filing in July in the Cape Coral/-Ft Myers FL area.

Now, one of those is a sparcely-populated state with one large metro area, and the other is a metro area in a state full of metros, so those percentages are not equivalent. 

My point is, real estate professionals and investors have to keep sharply focused on their own local area and the activity of local lenders. Bad national press is not a good way to start our work day.

Reports today reveal that prime mortgages are defaulting at unprecedented rates, too. Meaning, it’s not just sub-prime mortgages that are failing.  So, as it turns out,  the housing crisis was not caused exclusively by poor judgment on the part of lenders loaning to borrowers whose credit history was shaky. Nope. Today’s reports of double and triple the number of foreclosures filed at this time last year includes people who had great credit ratings.

Naturally that makes lenders more cautious, and their caution may make the housing crisis worse before it gets better. Bank REOs may just sit there because the mortgage loan officers at the same bank or other lenders refuse mortgages to prospective buyers.

It’s a not really a downward spiral, although it looks that way right now. It’s a loop. It’s a loop d’loop, which is right over by the roller coaster ride I talked about in an earlier post…. Houses are hard assets that people need and lenders will eventually find a way to finance.

Global Insight’s Patrick Newport is reported as saying, “Eventually, time will break the cycle. Pricing will drop enough to attract more buyers, and inventories will decline.” But that will only happen when average buyers have access to mortgage money.