Obama Administration’s Housing Scorecard Points to Real Estate Recovery

Earlier this month, the U.S. Department of Housing and Urban Development (HUD) released the March edition of the Obama Administration’s Housing Scorecard.  What is this?  It’s a “comprehensive report on the nation’s housing market.”

According to Realtor Mag, the Housing Scorecard spells good news for the real estate industry.  The recent report on the Housing Scorecard echoes much of the news in the Chicago area—home sales are on the rise, and neighborhoods are slowly recovering from the delinquencies inherent in the foreclosure epidemic.

HUD’s View on Housing Recovery

According to a press release directly from HUD, current data on foreclosures and the real estate market show continuing signs of recovery.  The press release referred to “key indicators” of progress, including home prices that “continue to show strong annual gains” and the sustained purchase of new homes alongside sales of existing homes.  While “the overall recovery remains fragile,” the numbers point to a markedly upward trajectory.

In fact, the HUD Deputy Assistant Secretary for Economic Affairs Kurt Usowski indicated that, “in 2012, homeowners’ equity grew by more than 1.64 trillion and rising home values lifted 1.7 million of them back above water.”  At the same time, he continued to emphasize that there’s still more work ahead of us “since there are so many families and individuals still struggling.”

In order to give you an idea of the positive effects of some of the government programs, you might want to take a look at the key data released in the Housing Scorecard.

Key Data from the Housing Scorecard

The HUD press release identified key points related to “the health of the housing market” and the effects of the Obama administration’s foreclosure prevention programs.  Here is some of the important facts that HUD featured in its press release:

·      Home prices showed large gains between January 2012 and January 2013.

·      New home purchases and existing home sales continued to rise across the year.  In fact, the purchase of new homes in February 2013 showed a 12 percent increase from a year ago, which itself showed an increase from previous studies.  According to HUD, these figures may be due in large part to the First-Time Home Buyer Tax Credit.

·      Foreclosure mitigation programs are working, as they’re providing relief for millions of homeowners.  According to the HUD press release, the Making Home Affordable Program has helped 1.5 million homeowners.  In fact, more than 1.1 million permanent mortgage modifications took place through the Home Affordable Modification Program (HAMP).  And at the same time, the Federal Housing Administration (FHA) “offered more than 1.7 million loss mitigation and early delinquency interventions.”

·      HAMP is still working to help homeowners avoid foreclosure.  The 1.1 million homeowners who received permanent mortgage modifications through HAMP now save about $546 on mortgage payment every month.  To date, that’s $18.5 billion.

What do these statistics mean for Illinois?  As the country continues to recover from the housing crisis, home prices and sales in the Chicago area will also continue to rise.  If you have questions about the real estate market or concerns about avoiding foreclosure, contact an experienced foreclosure defense attorney today to discuss your case.

See Related Blog Posts:

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Community Development and the Section 108 Loan Guarantee Program

In an earlier post, we reported that Cook County received a $30 million loan through the Department of Housing and Urban Development (HUD) for sustainable economic development in the Chicago area.  As we mentioned, the loan came through HUD’s Section 108 Loan Guarantee Program, which provides communities across the country with low-interest loans for large-scale physical development and community revitalization project.

It’s important to know details surrounding HUD’s Section 108 Loan Guarantee Program.  Now that we’re finally starting to see communities improving after years of foreclosures and vacant properties, this program could help with neighborhood rehabilitation in your area.

Role of the Community Development Block Grant (CDBG) Program

The Section 108 loan guarantee provision is part of the Community Development Block Grant (CDBG) Program, which provides communities with various resources to address their “unique community development needs.”  In brief, it works to provide services to the most vulnerable neighborhoods and areas in the nation.  The program began in 1974, and it’s one of the longest-running programs at HUD.  It operates with specific program areas in mind, and some examples include:

·          Entitlement Communities: this program provides grants to large cities and urban counties to “develop viable communities.”  It allocates funds for “decent housing, a suitable living environment, and opportunities to expand economic opportunities” for low-income and moderate-income persons.

·          State Administered CDBG: this program is also known as the “Small Cities CDBG program,” and provides grants to smaller units of local governments for community development projects.

·          Section 108 Loan Guarantee Program: you already know about this one, which enables communities to apply for loan assistance to carry out development projects.

·          Neighborhood Stabilization Program: for this program, HUD provides grant money to “communities hardest hit by foreclosures and delinquencies,” allowing them to purchase homes in the neighborhood for rehabilitation and redevelopment.  The idea is that these projects will help to stabilize neighborhoods.

As part of a larger program, the Section 108 provision has regulations of its own, including the types of projects that can be eligible for funding and specific loan details.

What Kinds of Activities Are Eligible for Section 108 Financing

According to HUD, activities that are eligible for Section 108 financing can include:

·          Economic development activities and housing rehabilitation initiatives as they’re defined by the CDBG Program

·          Acquiring real property (for rehabilitation or redevelopment)

·          Rehabilitating publicly owned real property

·          Constructing, reconstructing, and/or installing public facilities—these can include streets, sidewalks, and various other public sites

·          Relocating, clearing, and otherwise improving specific sites

There are other activities that remain eligible for funding through Section 108, but the ones listed above represent some of the key development projects that the program finances.

Specific Loan Details

In addition to being limited to certain types of activities, Section 108 also carries financing specifics.  The program has particular security requirements, which involve the public entity that is applying for funds, or the state, to pledge the principal security for the loan guarantee.  For all loans under Section 108, financing comes through underwritten public offerings with low interest rates, and a maximum repayment period of 20 years.

Of course, each loan is individually structured to meet the specific needs of the borrower, and to date, no borrower has defaulted under Section 108.

If you have questions about securing funding for community development or rehabilitation, an experienced attorney can answer your questions today.

See Related Blog Posts:

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Cook County Approved for $30 Million Sustainable Development Loan

Earlier this year, Antonio R. Riley, the Midwest Regional Administrator for U.S. Housing and Urban Development (HUD) announced that the department approved a $30 million loan guarantee for Cook County “to help finance four types of sustainable developments in the county.”  According to a press release from HUD, the loan will provide funding for a range of Chicago development projects, from small business projects to larger scale transit projects.  HUD defined these sustainable developments specifically as:

·          Transit-oriented, mostly mixed-use development within a half mile of passenger rail

·          Cargo-oriented projects near freight rail lines

·          Mixed-use hospitality/service sector projects near transit lines

·          Business Development loans

HUD hopes that its Section 108 Loan Guarantee Assistance Program will be a “powerful tool to drive economic development” in the Chicago area.  Riley indicated that the approved $30 million in funds will help for-profit businesses in Cook County to carry out a variety of economic development schemes, which will benefit low-income and moderate-income residents in the city.  In fact, Riley stated that the loan “is expected to create 600 new jobs” this year.

What is Sustainable Development in Chicago?

In Cook County’s application to HUD for the funding, it explains that its Department of Planning and Development “will administer this sustainable economic development initiative” and “will provide financing assistance for the economic development projects that qualify.”  Who will qualify under the scheme?  The County will work together with smaller communities and their organizations to determine eligibility for sustainable development projects, and they’ll partner up to “support these job-creating, economic developments.”

In fact, the City of Chicago actually has its very own Sustainable Development Division, which is “responsible for creating and expanding public open space systems” and “developing policies and programs to advance the sustainability of the City’s building, businesses, and urban form.”  This division is part of Chicago’s Department of Housing and Economic Development.

It has some long-term projects underway, which include improvements to waterfront access, initiatives to expand certain natural habitats and to improve the green quality of development sites, and programs to promote the local food industry.  While many of these aren’t the specific kinds of projects that the HUD loan will help to fund, they showcase Chicago’s interest in sustainable development, whether it deals with environmental and agricultural improvements, or transit-related initiatives that will be at the forefront of the $30 million loan.

What is the Section 108 Loan Guarantee Assistance Program?

Section 108 is part of a loan guarantee provision of the Community Development Block Grant (CDBG) program.  It’s intended for communities that are strapped for cash but need money for housing rehab, distressed public facilities, and other large-scale development initiaives.

Aimed at projects like those underway through Chicago’s Sustainable Development Division, the Section 108 Loan Guarantee Assistance Program helps local governments to borrow funds from private investors at interest rates that are reduced from typical loans.  With these lower interest rates, cities like Chicago can use the funds to “promote economic development, stimulate job growth, and improve public facilities.”  The loan program is intended to encourage private contributions and seed money to large-scale public projects in distressed areas.  It is HUD’s hope that the funding provided through this program might be able to “renew entire neighborhoods.”

If you have questions about acquiring a loan to purchase a foreclosure or other property in need of rehabilitation, contact an experienced attorney today.

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Hispanic Homebuyers Offer Hope for the Market

In recent months, we’ve seeing encouraging reports about the real estate market and an overall decline in nationwide foreclosures.  Although it might be tougher to find a property to buy in the current climate, home prices are finally on the rise and banks even seem to be turning better profits.  According to a recent article in the Chicago Tribune, Hispanic consumers are at the forefront of new homeownership.  The National Association of Hispanic Real Estate Professionals (NAHREP) agrees, reporting that “Latino potential first-time buyers have increased 38 percent since 2010.”  In fact, the NAHREP publishes an annual report on the state of Hispanic homeownership, and the most recent report contends that the Hispanic homebuyer market “is poised, due to its population size, high desire, and buying clout, to drive first-time homebuyer purchases and accelerate the nation’s economic recovery.”

However, the article suggests that these first-time buyers could be “stymied by a shortage of homes to buy and by competition from deep-pocketed investors.”  These potential limitations are echoed through an article in the Huffington Post last month, which voiced concerns about Hispanic homeownership being threatened by unfair housing practices.

Limiting Factors in Hispanic Homeownership

Perhaps if we know what’s limiting this budding market base, we might have a better idea of how to advance Hispanic homeownership in the Chicago area.

The Chicago Tribune alludes to the problem of a lack of inventory.  There are fewer houses on the market, and they have high price tags.  These factors can lead potential homeowners to make multiple offers on properties, and to be continuously outbid by others who are willing to bid even higher than the stated value of the property.  After months of this type of bidding, many first-time homeowners grow discouraged, and many stop bidding.

Often, individuals and families lose out to deep-pocket investors who can pay cash and closing costs up front.  The Huffington Post explains that “they get beat up by cash buyers and pool investors who offer a fast closing even at lower prices.”  This hurts many first-time Hispanic homebuyers, who often have to wait up to 60 days to close on their contracts based on the terms of loans backed by the Federal Housing Administration (FHA).

The NAHREP, despite its encouraging statements, has suggested that banks have also been more willing to offer low prices on foreclosure properties to cash buyers, which ends up hurting these individual homebuyers.  In many ways, the NAHREP suggests that “townships and municipalities can do their fare share” to ensure that foreclosures and other for-sale properties are in move-in condition.  In addition, they encourage banks to entertain serious offers from individual homeowners.  

In brief, the organization would like to see a focus on getting owner-occupants into foreclosures and other vacant homes, and it would like banks to move away from policies that “favor large investors.”

Encouraging Facts and Statistics for Hispanic Homebuyers

Gary Acosta, the co-founder and executive director of the NAHREP, said that despite the obstacles Hispanic homeowners face, they “seem to be very resilient, especially coming off the housing crisis.”  He indicates that Hispanic Americans are “forming households at a faster rate than the general population,” which is an arrangement that is “much more aligned with the purchase of a home.”

Acosta explains that there are some “nuances to working with the Hispanic market,” including language barriers and limited credit histories in certain cases.  Yet, he’s optimistic.  The Chicago Tribune quoted him as saying that “the major players in housing now understand, or are starting to understand, how important the Latino market is.”

If you have questions about homeownership or current terms surrounding mortgages and foreclosures in Illinois, contact an experienced attorney today to discuss your concerns.

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How to Rehab a Home with HUD’s 203(k) Program

Earlier this week, we mentioned that foreclosures are becoming more difficult to buy—prices are going up, we’re seeing bidding wars, and federal funds are being used to rehab many of the houses that could have made for easier buys on the market.  A story in the Chicago Tribune indicated that even those properties that “need a major overhaul” are in higher demand.  However, it’s still true that a “fixed-up foreclosure costs far more than one with a long list of repairs needed.”

Interested in buying a fixer-upper?  Although some advocates insist that there’s too much paperwork and prep needed to buy one of these properties, you may be interested in learning more about the Federal Housing Administration’s (FHA) 203(k) mortgage financing program.  Through this program, you may be able to afford a home that is still in need of some serious work.

What is the 203(k) Program?

The FHA, which is actually part of the Department of Housing and Urban Development (HUD), administers a number of “single family mortgage insurance programs,” which “operate through FHA-approved lending institutions.”  In short, HUD doesn’t make direct loans to potential homebuyers, but it has specific programs through which potential homebuyers can apply for loans through FHA-approved lenders.

The 203(k) program is a unique one that deals with loans for homebuyers who seek to rehab properties.  In fact, it’s the primary program administered HUD that helps with funding for “the rehabilitation and repair of single family properties.”

According to HUD, the 203(k) program is “an important tool for community and neighborhood revitalization,” as well as a significant tool to expand “homeownership opportunities.”  Often, when a potential homebuyer is thinking about purchasing a house that requires significant repairs, these homebuyers end up in a “catch-22” situation.  According to HUD, many of these homebuyers find themselves in a situation where “the bank won’t lend the money to buy the house until the repairs are complete, and the repairs can’t be done until the house has been purchased.”

The 203(k) program might be able to help in these cases.  It’s designed to help you secure a loan to purchase or refinance a home that will include the cost of the repairs and improvements in that loan.  It’s an FHA-insured 203(k) loan, and it’s “provided through approved mortgage lenders nationwide.”  Notably, it’s only available for people who want to occupy the home they’re buying—you’ve got to be an owner-occupant in order to be eligible.

How Does the 203(k) Loan Work?

First, you need to have a downpayment of approximately 3.5% of “the acquisition and repair costs of the property.”

After you’ve saved up for the required downpayment, HUD explains that the 203(k) loan then includes these steps:

·      The homebuyer will locate the “fixer-upper” and execute a sales contract with a real estate agent.  This contract will make clear that the homebuyer is seeking a 203(k) loan, and that the contract is contingent upon the homebuyer’s loan approval.

·      The homebuyer will select an FHA-approved 203(k) lender and submit a detailed proposal, including cost estimates for repairs and improvements.

·      An appraisal will be completed to determine the post-renovation value of the property.

·      If the buyer is approved, the loan will close.  It will include a “contingency reserve of 10 to 20 percent of the total remodeling costs” in case the homebuyer needs to pay for extra work that wasn’t accounted for in the initial proposal.

·      At the property closing, the seller will be paid, and the additional funds will be placed in an account to pay for repairs.

·      After closing, the mortgage payments and remodeling will begin.

·      The remodeling funds will be released to the homeowner “during construction through a series of draw requests for work that is completed.”

While some of these steps can be a bit tricky, the 203(k) program may be exactly what you need to purchase and rehab a foreclosure.  An experienced attorney can help you with this process.  Contact us today.

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Thinking About Buying a Foreclosure?

Are you thinking about investing in a foreclosure?  It’s looking like the real estate market is going to be a bit tougher this year.  Although the Chicago area saw more than 20,000 foreclosures between February of 2012 and 2013, competition for those Illinois properties is likely to increase this year.   If you want to buy a foreclosure, you may need to act quickly.

What’s Driving Prices Up?

According to a recent article in the Chicago Tribune, foreclosures are being listed strategically.  Real estate agents are listing these properties for prices that are far less than the likely final selling price.  This strategy creates bidding wars around the foreclosed homes, driving prices up.  This marketing technique generates wider interest and multiple bids on these properties.

Liz Sidorowicz, a Re/Max Signature real estate agent, described the process as generating a lot of “overbidding.”  She described a client’s bidding process on a “gutted Mount Prospect foreclosure” in which “even the switch plates were missing.”  The house was listed for $350,000.  The client submitted a bid of $421,000—nearly $100,000 more than the asking price—and still “lost out to a higher bid.”

In addition to a shift in the marketing strategy, there are other factors at work.  The slowing rate of foreclosures nationwide, along with falling mortgage rates and increasing home sales, is leading “those once-in-a-lifetime bargains” to fade from the market, according to a report from NBC News.  The supply of these homes is becoming more limited—the housing market is no longer saturated with attractive foreclosed properties.

In other words, the slow rebounding of the housing market is reflected in the diminishing backlog of distressed properties that were once selling at “deep discounts.”  Now, according to a RealtyTrac spokesperson, there’s a noticeable “shortage of inventory.”

Rehabbed Properties More Plentiful Than in Years Past

Another factor that’s affecting the availability of foreclosures for sale is the increasing curb appeal of many of these properties.  While once many areas saw homes in varying states of decay, a lot of these houses “are looking better than they have in years past.”

Why is this?  Some housing advocates suggest that it’s a result of the government’s increased effort to rehab properties before listing them on the market.  For example, the Chicago Tribune reported that Fannie Mae and Freddie Mac are taking greater steps to preserve neighborhoods, hoping to attract owner-occupants instead of people who are only interested in making some money from a rental property.

So in order to make many of these foreclosures attractive, or to fix them up so that they “look like the house next door,” government agencies are providing funds for new paint and carpet, as well as for the installation of new kitchens, furnaces, and other new appliances.  Fannie and Freddie know that they’re not going to attract owner-occupants with completely gutted homes—those are going to be purchased by investors instead.

And relatedly, these improvements are adding to general increased housing prices and availability.  It makes sense that a “fixed-up foreclosure costs far more than one with a long list of repairs needed,” since it “doesn’t carry the problems that come with trying to secure financing for properties that are not in habitable condition.”

But keep in mind, even properties that are still in need of substantial rehab work are “going fast.”  If you have questions about foreclosures and the real estate market in Illinois, contact a licensed attorney today to discuss your concerns.

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No Hardship Requirement in New Mortgage Modification Program

Do you think you might qualify for a mortgage modification?  Thanks to a recent Fannie Mae and Freddie Mac policy change, the loan modification process is now a lot simpler if you have a mortgage that’s owned or backed by Fannie or Freddie.  According to an article in the Wall Street Journal, Fannie Mae and Freddie Mac will waive the requirement that “borrowers who are already seriously delinquent on their mortgages prove hardship.”  In addition, this policy change will provide homeowners with an easier path to a permanent modification.  It’s intended to be a streamlined effort to cut out the middle man, providing borrowers with a quick and painless decision about their loan modification applications.  In short, Fannie Mae and Freddie Mac are making it a lot easier for homeowners to avoid foreclosure.

How Will the New Loan Modifications Work?

According to the Los Angeles Times, the key difference from the current system is that buyers won’t have to prove a hardship.  Under the old policy, borrowers had to show proof of hardship, and they had to provide specific documentation of their current financial situations before the hardship could become permanent.  Under the old program, many borrowers thought the required documentation of their incomes and hardships was too extensive.

Further, mortgage servicers—not Fannie and Freddie directly—are used to handle loan payments and to conduct modifications.  With the old plan, these servicers often “struggled to implement timely loan modifications” because of the “stringent demands to document borrowers’ financial situations.”  On the flip side, borrowers also complained that the servicers took too long, or that, in some cases, the servicers lost their paperwork entirely, which resulted in denials for loan modifications.

Although the Federal Housing Finance Agency (FHFA) had these previous measures in place to prevent strategic defaults, the risk of strategic default has now become “less of a worry than it was four years ago.”  As a result, the FHFA can offer a new policy that seeks to avoid problems with this extensive level of documentation.  Or in other words, no more required proof of hardship.

The program will begin in July 2013 (this year) and will end in August 2015.  It’s only available for Fannie- or Freddie-backed loans, and the borrowers must be delinquent for at least 90 days, but for no more than 24 months.  In addition, the loan “must be first mortgages, at least 12 months old, and amount to 80 percent or more of the property value.”  According to the Los Angeles Times, this should lead to a reduction by about 30 percent in the average payment, and it should lower the mortgage interest rate to about 4%.  In some cases, borrowers won’t be required to pay interest “on a portion of the loan.”

Will the New Policy Make a Difference?

Housing advocates called the policy change “a step in the right direction,” noting that it will help to address some of the problems that borrowers face with loan servicers.  But they emphasized that it’s still not doing enough to help homeowners who are at risk of foreclosure.  Specifically, advocates argue that the policy change won’t affect the principal loan balance for homeowners.  For example, California Attorney General Kamala D. Harris explained that “more must be done to allow homeowners to benefit from principal forgiveness and forbearance.”

A loan modification need not refer only to the interest rate that homeowners pay.  Rather, according to the U.S. Department of Housing and Urban Development (HUD), a loan modification can be any “permanent change in one or more of the terms of a borrower’s loan” that “allows the loan to be reinstated, and results in a payment the borrower can afford.”

If you have questions about a loan modification, or if you’re concerned about becoming delinquent on your mortgage, contact an experienced attorney today to discuss your options.

See Related Blog Posts:

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