Fannie Mae announced that all of it’s foreclosed homes that are being put on the market are only available to owner occupant buyers for the first 15 days that they are on the market, in what it is calling the ‘First Look Initiative‘.

The idea behind this is to help stabilize hard-hit areas with more owner occupied buyers moving into the neighborhoods, as opposed to investors who will then rent the properties to tenants.

And, buyers who use public funds to cover the down payment, such as Georgia Dream funds, will be given priority in making an offer on the property, and will be given 45 days to close on the property.

This is very similar to the way HUD has for years treated their foreclosed homes.  Owner Occupant buyers are given the first opportunity to put an offer on the home, and later if no offers come in, then the bidding is opened to investors.  This could be some good news for some metro Atlanta neighborhoods; but will slow investors down even more.

Note the previous post about the precipitous drop in New home sales and housing starts.  Well, just the opposite happened with the existing home sales – resales are on the rise.

And, existing home sales are rising quite well:

As you can see, there has been a very nice pick up in home sales compared to this point last year.  Now, a lot of that has to do with the $8000 tax credit for first time home buyers; but anecdotally there is a nice pick up of move-up buyer home sales as well.  And, with the recent introduction of the $6500 tax credit for move-up buyers, that trend should continue as well.

While more homes are moving, prices are dropping in general.  Or, perhaps the opposite is true, that because home prices are so far down, buyers are beginning to come out and explore their options.

Does all of this point to a housing rebound?  Too early to tell if Atlanta will move from a buyer’s market back to a seller’s market in the near future.  A LOT of that will depend on the movement of mortgage interest rates.  And rates are pointing upward, although probably not until late Spring.

So, if you are in the market for a home, my best guess currently is that you should act on that and lock in a rate prior to April, 2010.

Housing Starts – or the number of new permits to build residential homes – was down last month by 10.6% over the month before.  Economists generally expected housing starts to be up by 1.5%.

That’s a 12.1% swing to the downside from expectations.  In other words, there is just not that much building going on out there.  To be expected?  Well, sure.  But not quite that little building!

My take?  I feel for the builders out there who are treading water, trying to stay afloat.  That is a hardship for a lot of families.  Having said that, I think it is generally a good thing that housing starts are so far down, because it helps focus the home buyers who are in the market on the existing inventory.  And until that is gone, home prices will continue to be depressed – which is a good thing for home buyers, but we do hope to turn that trend at some point, and wading through the existing inventory of homes is the only way to help stabilize home prices.

But there is another reason why housing starts are so far down.  In a lot of areas of the country – including metro Atlanta – a home buyer can purchase a home for less than the cost it would take to construct that home new.  So, home builders simply cannot compete with the existing inventory without losing money.

What does that mean for rates?  Well, if that were the only economic number this morning, then mortgage rates (i.e. bonds) would rally and rate would fall lower.  Which will will likely see over the course of the day.  However, CPI (Consumer Price Index) numbers also came out this morning, and they show consumer prices going up slightly, which is just slightly inflationary.  And, as avid readers of this blog know all-too-well, inflation and bonds are like oil and water.  They don’t mix.

Initially this morning rates are just slightly higher than yesterday, but overall the news is good for mortgage rates, and they will settle right back down to the lows we have seen over the past week and a half.

Bottom line:  If you are a home buyer, you are in the cat bird seat right now.  Take advantage.

To receive the $8000 tax credit, you must be a first time home buyer.  And, as is widely reported, a first time home buyer is anyone who has not owned a home in the past 3 years.  Simple enough.  Right?

Well, no.  My definition of not having owned a home in the past 3 years was simply calendar years.  So if you sold a home in October of 2006, then rented, and are now closing on a new home in November of 2009, then you qualify for the tax credit as a first time home buyer.  And, I was wrong.

Here is an email that I received from a recent client that I helped to finance a home:

I do have some unfortuante news relating to the First Time Homebuyer Credit. The IRS has denied my refund be cause I owned a home for one or two months in 2006. They require 3 full “tax years” to re-qualify. So, even though I qualified as a FTHB for the loan, I did not qualify for the tax refund.    - Will

Turns out, the IRS defines the three years as being three tax filing years, not calendar years.  An important and potentially expensive distinction.  Now, for the $6500 tax credit for move-up buyers, you need to have lived in your home for 5 of the last 8 years.  That seems more cut and dried, and not so open to interpretation.  However, I wonder if you live in the home from December, 2004 to present, if the IRS would interpret that as 5 tax years as well?

I will try to get the answer, and post it here.

Part of the new, expanded first time home buyer tax credit, is not for first time buyers at all.  If you have lived in your home for 5+ years out of the past 8 years, and are now moving, then you will qualify for a $6500 tax credit when you purchase your new home.

The details:

1. Must be a primary residence
2. Max income limits to qualify of $125K single, and $225K for a couple filing jointly (with pro-rated tax credit for $20K above those limits)
3. The home purchased must be under an $800K purchase price to qualify
4. Be under contract by April 30, 2010, and close on that home within 60 days of April 30.

I saw a story about some 30 loan modification companies being shut down in Nevada.  And, it does not surprise me.  I have looked into several loan modification companies, hoping to find one that I could refer my clients to, the ones who need the service.  And, I could not find one that I would refer anyone to – even though they all offered to pay me a referral fee.

The problem is not (always) the intent of the folks offering to handle your loan modification.  In many cases, they are good people with good intentions.  No.  The problem is that banks are constantly changing their own criteria for allowing a loan mod, and the political structure is adding things constantly as well.  It is hard to master and hit a moving target.

And loan modification companies nearly always charge a fee, and a fairly substantial fee, paid up front.  That makes sense from their point of view, because once they successfully complete the mod, the client is just not going to be real motivated to hand over the $3500 fee.  Hey, their loan has been modified and the rep at the mod company cannot change that if he is not paid, right?  And, the loan mod rep knows that he is aiming at a moving target, so may not be successful.  So, better to get some funds up front, or he could be out of business real soon.

As you can gather, I do not recommend paying a service to help you modify your mortgage.

So what do you do if you cannot refinance because your home is under water?  Plan on taking some time out for this purpose, and go through the process yourself with your mortgage company.  It is sort of like applying for a mortgage, in reverse.

Or, you can check to see if you loan is owned by Fannie Mae or Freddie Mac – I can check for you, if you like.  If it is, then you can now refinance your mortgage even though your are underwater.  And, the qualifications for that refinance are fairly easy, and very similar to qualifying for a refinance normally, when your home is not under water.

Oh, and don’t confuse the ownership of your mortgage with the place you send your monthly mortgage payment.  That is the ’servicing’ company, and often they are servicing the loan for Fannie or Freddie, the owner of your mortgage.

Explore that option first.  You may be happy, and save a lot of money.