Increased Lending and More Loan Modifications and Short Sales, Key to Recovery, Say REALTORS®

Washington, DC, January 05, 2012

Stabilizing and restoring the health of the housing market is critical to a broader economic recovery, according to a white paper released yesterday by the Federal Reserve Board. Many of the issues and recommendations outlined in the paper support key principles established by the National Association of Realtors® to help revitalize the housing industry and economy.

The white paper, The U.S. Housing Market: Current Conditions and Policy Considerations, calls for increased lending to creditworthy home buyers and more loan modifications, mortgage refinancings, and short sales to reduce the rising inventory of foreclosed homes and help stabilize and revitalize the housing industry; an approach long recommended by NAR to help spur the housing market recovery.

“As the nation’s leading advocate for homeownership and housing issues, NAR knows that a strong housing market recovery is key to the nation’s future economic strength,” said NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami. “Improving access to affordable mortgage financing for qualified home buyers and investors and aggressively pursuing more loan modifications and short sales is necessary to help reenergize the housing market and spur an economic recovery.”

The pendulum on mortgage credit has swung too far following the housing downturn. According to the 2011 NAR Member Profile, 34 percent of Realtors® reported that the most important factor in limiting their clients’ ability to buy a home was difficulty in obtaining a mortgage. While NAR supports responsible and strong underwriting standards, unnecessarily tight credit restrictions are keeping many qualified home buyers from purchasing homes, which could help absorb excess inventories of homes in foreclosure.

“Creditworthy consumers continue to have difficulties securing affordable financing despite their proven ability to afford the monthly payments,” said Veissi. “Expanding financing opportunities to qualified buyers could help reduce distressed property inventories, minimize the negative impact those homes have on local markets and restore vibrant housing markets and neighborhoods.”

To prevent further foreclosure inventory increases, NAR also urges lenders to take more aggressive steps to modify loans and keep struggling families in their homes. Significantly reducing monthly mortgage payments will help more families remain current on their mortgage and allow them to remain in their home, reducing the impact of foreclosures on local home prices.

For homeowners who are unable to meet their mortgage obligations, NAR has urged lenders and servicers to quickly approve reasonable short sale offers so these people can avoid foreclosure. The short sale process can be time-consuming and inefficient, and many would-be buyers end up walking away from the transaction.

“Loan modifications and short sales help stabilize home values and neighborhoods, and limit the losses incurred by lenders, the federal government and taxpayers, which is good for everyone,” said Veissi.

The Fed paper also addresses converting foreclosed properties into affordable rentals. NAR supports reducing the barriers that prevent owner-occupants and small investors from accessing financing, such as opening the Federal Housing Administration 203(k) program to investors. NAR also believes these efforts are best made by local entities that understand the challenges of the local community and will respond to renters’ needs.

In addition, NAR is concerned about proposed bulk sales of distressed properties and believes that every effort should be made increase liquidity for consumers and small investors since bulk sales will likely result in greater losses for taxpayers and have a more negative impact on housing values.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

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Credit Care

(An excerpt from www.feedthepig.com)

New year, new credit? Not quite. Many things reset every year on January 1, but your credit score is not one of them. And this year a new credit report will dig much deeper into a consumer’s history than traditional credit reports. CoreLogic is working together with credit score provider FICO to create a new scoring system based on a broader collection of data. The actual score will be ready in March and is being created for mortgage and home equity lenders; major lenders are interested in utilizing the information, which means it could eventually be built for other types of credit. Here are a few things you should know about the new system.

Why are they doing this? According to CoreLogic, the aim is to provide lenders with more details about prospective borrowers, enhancing what they already know from the more traditional credit reports.

What will be revealed? Apply for a payday loan? Have a property tax liens? Miss a rent payment? Fall behind on HOA dues? The new credit file will capture all of this financial activity and more; it maintains a collection of consumer data on almost everything that most of the traditional credit bureaus do not.

What does this mean? As a result of the additional data included, the new report may shed negative light on previously “clean” records. For instance, it may show that you owe more than your house is worth or if you fully own any other real estate properties. It is also supposed to catch smaller lender mortgages that the big credit bureaus may have missed.

Is this good or bad? Although it is scary to think that companies may now have even more of your personal information, the added information could help some consumers with skimpy credit files by highlighting positive behaviors, like making rent payments on time.

Make sure you are aware of your credit score and understand your credit report, both can have a significant impact on your finances and financial future.

Visit www.feedthepig.org for more money-saving tips.