The nation’s housing market is having its road to recovery paved with a new mortgage refinancing program, which was unveiled Monday October 24th 2011. Building upon the successes of the Home Affordable Refinance Program (HARP), the government has introduced some changes to the rules that will allow more homeowners who find themselves sinking further into debt to reduce their debt by taking advantage of much lower interest rates. Qualifications for this new program require the mortgage to be backed by Fannie Mae or Freddie Mac, and must have been originally sold to the Government Sponsored Enterprises (GSEs) prior to May 31st 2009.
The previous guidelines limited the qualifying homeowners to those who owed up to 25% more than their home was actually worth. Under the new revisions, this 125% loan-to-value (LTV) limitation cap has been removed.
There have been other program enhancements designed to address issues that have proven to restrict the program’s impact. Certain risk-based fees have been eliminated, and mortgage insurers can now automatically transfer the original loan’s coverage to the new loan. As well, Freddie Mac and Fannie Mae have eliminated the need for a new property appraisal where there is already an Automated Valuation Model (AVM) estimate provided, and certain warranties and representations on any program refinanced loan have been done away with. The final date for HARP has been extended from June 30th 2012 to December 31st 2013.
The risk of homeowners foreclosing due to strategic defaults will be lowered with the new guidelines. By opening HARP to a larger pool of indebted homeowners, borrowers will be able to get control of their household finances and will be less likely to walk away from a mortgage with negative equity. About 1 million homeowners have already taken part in the program and refinanced their mortgages, and it is estimated that another 1 million homeowners will step forward to take advantage of the program.
You can learn more about the Home Affordable Refinance Program (HARP) here.
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The number of properties in Hawaii attached to foreclosure filings fell dramatically in August, dropping a staggering 75 percent when compared to the same month a year ago. While this number may seem like a good thing, the reality is this number represents a lag in the system as it switches from non-judicial to judicial proceedings. Based upon implications of Act 48, which was put into law May 6th 2011, bank’s lawyers most likely suggested cancelling any non-judicial proceedings. Once these non-judicial proceedings are re-filed in the court and judicial system, the number of foreclosures will once again rise.
For the time being, however, Hawaii has moved down to the 32nd spot for total foreclosures in the nation, based upon information supplied by Irvine California’s RealtyTrac. For every 431 housing units in Hawaii, there was one foreclosure filing for August, for a total of 1,197 foreclosure filings. That number breaks down to 725 notices of default, 74 public auction notices and 398 bank repossessions.
The intent of Act 48, while noble, has so far failed in its execution. Instead of opening up dialogs between lenders and property owner occupants who are unable to meet payments, Act 48 has created a backlog in an already over-taxed and under-staffed court system. As a real world example, immediately upon Act 48 becoming law, Fannie Mae decided all its foreclosures must be commenced as judicial foreclosures, and any non-judicial foreclosures not yet in process are to be dismissed and converted to judicial foreclosures. Obviously, this immediately caused the court backlog to grow, and it only became worse as time moved ahead.
While the state of Hawaii did launch its Mortgage Foreclosure Dispute Resolution Program this month, giving the opportunity for lenders to meet with owner-occupants of homes in non-judicial foreclosure for purposes of trying to negotiate loan modifications, time will tell if this is an effective way to handle disputes of foreclosure and repossession.
As it is, Act 48 has done little to stem the flow of foreclosures. Rather, it has simply redirected the steady stream to a court system barely able to handle what it already had to deal with before Act 48 dumped a lot more work on them.
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Act 48 was passed into law May 6th 2011 by the Hawaii Legislature and signed by Governor Abercrombie. The intent of the law was to give lenders and property owner occupants the opportunity to negotiate the terms of the loan when payments exceed the ability to pay. The reality of what the law has brought is more congestion to an under-staffed, over-worked and under-funded court system. By example, effective immediately upon the passing of Act 48, Fannie Mae directed that all its foreclosures must be commenced as judicial foreclosures, and any non-judicial foreclosures that have not proceeded to sale are to be dismissed and converted to judicial foreclosures. as one can imagine, this immediately caused the backlog to grow, and it will only become worse as the days move forward.
There are two types of foreclosures a lender may pursue: Judicial and Non-Judicial. The main difference between judicial and non-judicial foreclosure proceedings is that a deficiency judgment against the borrower can happen, but this would not be the case under a non-judicial foreclosure process. Non-judicial foreclosures have two forms, Part 1 and 2. Part 1 is a fast, low cost option for lenders that does not require court or judicial proceedings. Unfortunately, Act 48 has put the brakes on Part 1 until at least July 1st 2012. Part 2 non-judicial also bypasses the need for a judicial proceeding but was not widely used as it required the borrower to sign and return a conveyance document. However, Act 48 did away with this signature requirement, and Part 2 non-judicial proceedings may still go ahead.
The immediate issue with respects to the fallout of Act 48 will be the sudden reduction in bank-owned property available to the market. We have already seen a huge reduction in the number of such listings in the Hawaii MLS and this will only become more so. Existing inventory will be bought up by those buyers looking for bottom of the market pricing. As the inventory becomes more scarce, the prices will go up for the available bank-owned properties.
Act 48 was a good idea on paper that felt apart in a real world application. An already over-taxed court system has now become even more plugged up, delaying judicial foreclosures by up to 5 years. Delinquent homeowners can rest easy knowing it will be a long time before anyone comes knocking to make them pay or leave. The options for lenders to collect on their dues have been limited by Act 48 and will be further hampered by the court system’s backlog. With no budget to remedy the staffing issues of the courts, foreclosures will sit stagnant for years on end until a proper solution to this present situation is figured out and put into action.
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The Ritz Carlton Kapalua is going to be auctioned on May 4th, 2011.
Lehman Brothers received approval in March to put the oceanfront Ritz Carlton Maui up for auction. The foreclosure suit, originally filed in September against Gencom Group, Maui Land & Pineapple Company and other institutional investors, is one of the largest foreclosures in West Maui history.
Originally Lehman Brothers issued $232 million in loans to finance an extensive renovation and condominium conversion plan. The Ritz’s owners planned to repay the loan to Lehman through sales of 107 residential condos, all in one wing of the hotel.
Gencom Group, a Miami-based hotel investment and development company led the renovation and condo-conversion efforts. Between July 2007 and December 2007, the Ritz was closed for renovations. At the beginning of 2008, Gencom announced that 93 binding condo sales contracts had been signed at an average of $1.9 million each.
Most of these projected sales failed to be completed. Of the 93 contacts, only 34 sales were completed. The owners of the Ritz Carlton Kapalua then defaulted on the Lehman Brothers loan in early 2009.
So next month, in May, the 73 unsold residential condos, 297 rooms, common area, commercial property, and 21 undeveloped acres of land will go up for auction collectively as one sale.
Will someone step forth and outbid Lehman on May 5th? We’ll see in less than 30 days.
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The Sea Horse Ranch is up for sale again.
Five years ago it was listed for $12 million. Today it’s being offered for $2.3 million. Here’s a Google Map so you can see where this estate is located.
The contemporary modern architectural design of this home is reminiscent of one of the many palatial estates along the coast of Malibu. Timeless in both style and longevity, this concrete home sets up high on a 51 acre palisade overlooking the azure blue waters of Maui’s North Shore. Unparalleled mountain and ocean views in all directions. The ultimate in privacy and seclusion yet only a short 15 minute drive to the heart of Wailuku. Ideal property for someone who would like to commute via helicopter. There are 8 additional water meters available. Private water system. Additional structures are caretakers quarters, pool cabana, workout room, barn, and 150 ft. x 200 ft. fenced arena.
Click here to see the full listing.
According to the listing agent The Sea Horse Ranch is now priced $2 million below a recent appraisal.
The Smith Team can represent you as the buyer on this unique property. Please give us a call at (808)572-0866 if you’re interested in learning more about The Sea Horse Ranch.
Have a great day!
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According to the Mortgage Bankers’ Association economists existing-home sales, which are expected to be about 8 percent lower this year than last, are expected to grow by less than 2 percent next year before increasing by 16 percent in 2012.
New-home sales, which will probably drop 13 percent this year from last, are expected to bottom out in the third quarter of this year and grow by 20 percent in 2011 and 40 percent in 2012.
Mortgage rates are probably headed up, but may still be below 6 percent in two years, the forecast said. MBA economists expect fixed-rate mortgages to average about 4.4 percent in the fourth quarter of this year, increasing to 5.1 percent by the end of 2011 and reaching 5.7 percent in 2012.
Have a wonderful week!
Mahalo Nui Loa,
The Smith Team
P.S. In discussion with a client this morning, he reminded us of Warren Buffet’s philosophy. He doesn’t try to buy at the bottom. He buys on the way down. Likewise, he isn’t greedy and sells on the way up. Here are more Buffet witticisms. How do we relate this to real estate? Well, we can’t say it is the bottom, but we do feel it is a good time to buy. He also said, “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
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According to Fannie Mae, there are 75 Fannie Mae bank owned properties in the pipeline on Maui. Currently, there are a total of 35 active listings in the MLS. Click here for full list.
Interestingly, there is special financing that you are eligible to receive when acquiring a Fannie Mae home. There is HomePath Mortgage Financing where you can put as little as 3% down (besides your own savings, it can also be a gift, grant, or loan from a non-profit organization), available to both owner occupants and investors, no mortgage insurance, no appraisal fees and low competitive interest rates.
There is also the HomePath Mortgage Renovation Mortgage Financing that allows you to fund both your purchase and light renovation. Email us if you have any questions and would like a lender recommendation on Maui that specializes in this type of financing.
Have a wonderful week!
Mahalo Nui Loa,
The Smith Team
P.S. We featured the Tuscan Villa this week because it must be sold to satisfy Estate Taxes. So even though the previous owner had over $8 Million in hard costs in to this property, don’t be afraid to make an offer.
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Here are five smart reasons to buy a home now.
1. Low Mortgage Rates
2. Houses are in move-in condition
3. Terrific houses are coming on the market
4. Appraisal regulations are finally aligned with market realities
5. Plenty of programs
So, if you are looking for a home, please allow us the opportunity to work with you to find the perfect property to match your needs and budget.
As a reminder, you can search all MLS listings from our website. After you have selected your criteria, and done a search, hit Save Search. Then, whenever there is a new listing matching those criteria, you will be automatically notified.
Have a wonderful week!
Mahalo Nui Loa,
The Smith Team
P.S. Ken will be on vacation for 4 weeks beginning August 6th. Follow his exploits on Facebook, or check out his progress during the National Scrabble Championships. He is entered in the Intermediate Division.
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What the Mortgagor Needs to Know
As a mortgagor facing possible foreclosure you are probably feeling a lot of pressure. The stress of losing a home through foreclosure is also usually compounded by a variety of other life stresses and therefore can be an extremely difficult time in your life. Indeed, it’s important to understand that although you may be looking at foreclosure, you have some rights.
First of all, you have until 3 days before the sale to prevent default by paying the debt and other costs associated with foreclosure. Hawaii foreclosure law attempts to protect the borrower by ensuring that you receive ample notice about an impending foreclosure. Even when a power of sale clause exists, the bank must give you what constitutes a minimum of 4 weeks notice before they can attempt to auction your property.
More importantly, when your lender has provided you with a notice of intent to foreclose, you are free to sell your property on your own. In many cases of foreclosure, the mortgagor often gets less than the value of the property. By selling your property before foreclosure, you are more likely to get a fair price.
What the Foreclosure Home Buyer Needs to Know
Foreclosure home buyers need to understand that the process is fraught with loopholes and these sales are rarely straightforward. Nevertheless, when you purchase a foreclosed property, you often save a great deal of money.
Still, home buyers who are interested in foreclosure properties must often accept a property without having seen it and you must also accept that other parties are going to be interested in bidding on the property. Non-judicial foreclosures are usually more straightforward for home buyers as with judicial foreclosures bidding doesn’t stop until a court confirms sale. This means you may win the auction and still lose the property in the end.
The timeline for foreclosure sales is usually around 60 to 90 days but depending on the property and the legal matters involved a foreclosure sale can take up to a year to finalize. Legal complications with foreclosure sales are simply a part of the process and you must be prepared and patient when you’re shopping for foreclosure properties.
Nevertheless, foreclosure properties are fairly common throughout Maui because of the current economic climate and you may find a great deal on a beautiful property if you follow the foreclosure route.
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According to noted economist, Paul Brewbaker, “If Maui real estate prices haven’t already hit bottom, they’re not going to get much lower.”
He further stated that it wasn’t worth looking for the last 5 dollars, and if you want a bargain, the time to act is now.
In addition, even if prices do drop further, the likelihood is that interest rates will more than offset any possible savings for those who are financing their purchases.
The uptick in housing prices in California, fortells an uptick here, as Maui closely follows the trends in California; although normally with a lag time. Read the full article.
Next week, we will put up a link to the video, so you can see for yourself the data which Mr. Brewbaker is using for his forecast.
Have a wonderful week!
Mahalo Nui Loa,
The Smith Team
P.S. Ho’onanea at Lahaina is a brand new D.R. Horton project with terrific pre-construction pricing. Here are three representative Listings.
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