Update on Fannie and Freddie

The government has agreed that Fannie and Freddie will be no longer. They plan to roll out the plan soon with the intention of completing the phase out in 5-7 years. The sole purpose of getting rid of Fannie and Freddie is to get government out of the mortgage industry and put the private sector back in. Right now, 9/10 mortgages are backed by the government. In addition to removing themselves, the government is also proposing changes to FHA loans in order to level the playing field. They still will require 10% down on conventional loans, but will raise monthly premiums another 25%, which will make qualifying for a loan a bit harder. The hope is that by raising FHA monthly premiums, it will be harder to qualify for the loan and buyers will be more inclined to go back to buying conventional loans which will be owned by private investors. The idea is that if private investors are ones setting the terms they will keep interest rates lower in order to compete with each other. Let's hope they're right. Guess we'll just have to wait and see.

Fannie Mae and Freddie Mac- no more?

For the past year, rumors have been swirling over the fate of Fannie and Freddie, especially with the talk that China may sell off their percentage of the Fannie and Freddie stocks and the recent announcement that Fannie and Freddie were "delisting" from the New York Stock Exchange. A decision by the Treasury was to be released on the future of the mortgage firms at the end of January, but has since been pushed back to mid-February. Reports are saying the statement could be released as soon as the 11th.

The talk seems to come down to the overall shut down, combination, or sale of the firms by the end of 2012. The reason for the drastic decision is that confidence is at an all time low and keeping them around would cost the US taxpayer another $73 billion, bringing the total bailout funding to $215 billion, a position that cannot be sustained in the long run.

Republican Scott Garett accuses the two mortgage companies of being the major cause of the financial crisis. He proposes that the two companies be overhauled, but did not say outright that the companies should cease to exist, privatize, or reduce in size.

The Obama Administrations has proposed the creation of a new federal subsidy, but Republicans don't feel that's the best solution. Since the elections, Republicans, in the House and Senate have been writing bills and amendments asking for the end of the bailouts or for an overhaul of Freddie and Fannie. Currently, Rep. Jeb Hensarling, the author of the sole bill in Congress (H.R. 4889), asks that any further bailout of the two mortgage companies be halted and for both companies to close. As of this moment, the bill is stuck in the House Committee on Financial Services and any action does not appear to be expected.

Many fears surround the topic, suggesting the housing recovery remains too fragile and feeble for the government to abandon Fannie and Freddie anytime soon and that the continued bailout is our only option at this moment. Needless to say, it's obvious something has to be done.

What would you like to see happen to Fannie and Freddie?

Cash is King in Las Vegas

Yesterday, the Greater Las Vegas Association of Realtors reported that in January more than half of the transactions were cash purchases. For the most part, these cash investors are looking to rent out their investment properties. Paul Bell, GLVAR's president, believes that the cash investors are crucial to our Las Vegas market, "without them, the homes would sit vacant and inventory would rise. With low rents and attractive single-family residences available, many tenants are opting to rent their own homes rather than live in complexes."

If you are looking to invest in Las Vegas real estate, or are perhaps looking to rent a single family residence, please don't hesitate to contact me.

Reverse Mortgage Loans, and what they can do for you...

Late this morning, agents in my office were introduced to a few reps from Wells Fargo, the topic they discussed referred to Reverse Mortgages and the great opportunities it has for our clients. I am so excited about what they shared that I had to let you know about it right away!

First let's start off with a little definition, what is a Reverse Mortgage?

The easiest way to describe a reverse mortgage is that rather than the traditional mortgages, where you pay a monthly mortgage payment, the reverse mortgage is just the opposite... the bank pays you!

I know what you're thinking- "That can't be right. Why would the bank pay me?"
First, in order to qualify for the FHA-insured loan, you need to be at least 62 years of age, and all parties involved in the transaction (specifically those placed on title) will need to be as well. The only thing you'll need to submit is documentation on your assets. There is no credit check or Loan to Value ratio necessary to qualify for the loan! You can choose to use the loan in 3 ways. You can take out the money as a lump sum, take out part of it as lump sum and use the rest as a line of credit, or you can draw out from the line of credit and pay yourself a monthly income. The line of credit can be expected to increase over time (as long as money remains in the line of credit). If you draw out any money and use it as income, the income is tax free.

To clarify, you must have equity in your house in order to qualify for this loan. But, if you've lived in the property for awhile you have probably accrued some equity. This is a great thing to do if you happen to be a homeowner over the age of 62 who finds they have equity in their property, but are finding it difficult to keep up with the payments of their current mortgage.

Let's discuss what property types are eligible for this loan...
you can purchase a Single Family residence, HUD-approved condo, Planned Unit Developement (PUDs), Two- to four-unit properties (one unit must be occupied as a primary residence), or a manufactured home built after June 15, 1976.

Requirements of the new home
The home must be the primary residence, must be occupied by the borrower within 60 days from close date, and construction must be complete, properly habitable, and a certificate of occupancy or its equivalent must be submitted prior to the loan application.

It is essential that if you receive a reverse mortgage that you pay your taxes, your insurance, your HOA dues, and is kept in good shape.

Wells Fargo wants to ensure you are not being pressured, so all seniors wanting to apply for a reverse mortgage must first attend a meeting with their local rep (which I can get you in touch with if you live in the Las Vegas/Henderson/North Las Vegas Valley), then a counseling session with a Hud-approved counselor. These counselors will send you a packet of information, and will then speak to you on the phone. The conversation typically lasts for about an hour, and is to ensure that no one is pressuring you into the application and you fully understand what this mortgage entails. Counseling is also required to be attended by all parties in the transaction, regardless if they will be on title or not.

Wells Fargo is the nation's leading originator of reverse mortgage loans. In December of 2010, here in Las Vegas, they closed 1,832 loans. Bank of America had only 837, which was the closest of their competitors. It is expected that more of these transactions will happen more frequently with the expected retirements of the baby boomers and the current economy we find ourselves in. They are here to help you and can answer any questions you have about the program, also known as the Home Equity Conversion Mortgage (HECM). If you would like more information about this loan, please contact me or contact your local Wells Fargo Home Mortgage rep.