The National Association of Realtors’ V.P. Ron Phipps stated one of the most important ways for consumers to see a bright future in terms of the economy is for Congress to extend the $8000 home-buyers tax credit. The tax credit has already made an impact as home sales have increased an estimated 5.1 million for the year. Housing inventory has slowed down helping to stabilize house prices. Since the momentum takes awhile, there’s not a better time to build on that by the extension of the tax credit through next year.
The present tax credit is set to expire on November 30th. Those who are in contract now may not be able to take advantage of the credit and close by that time. A few other things that Philips is pushing for is to make the FHA, Fannie Mae and Freddie Mac limits permanent that were established for this year, keep the governments continued involvement in the secondary mortgage market, discuss the Home Valuation Code of Conduct’s side effects that are slowing down sales, and give incentives and uniform procedures for short-sales.
A few weeks ago I was mentioning how the rates consumers pay are tied to their credit scores and tips on how they can improve them. Well now in light of the recent stimulus package, both Fannie and Freddie are planning large fee increases by toughening their credit score and down-payment rules on April 1, 2009.
If a buyer is purchasing a duplex, the buyer could be charged a 1 percent add-on to their interest rate. Lenders will be if their not already factoring in these higher fees. Now buyers with down payments of less than 25 percent will be charged a three-quarter point add-on penalty, no matter how high their credit score is.
Those who would like to refinance and take cash out could be charged three points depending on the amount of equity they have.
Source: Washington Writers Group, Kenneth R. Harney (02/15/2009)
We might see more of a surge of home sales and loans if the lenders would loosen up their guidelines a little more. Now I’m not saying that they should go back to the lax underwriting guidelines that contributed to the housing crisis. But given the economy and the inability for the average American to place a decent down payment on their home, lenders can make getting loans a little more flexible.
Risk based: Lenders might want to take a queue from FHA, or the temporarily defunct CALHFA. Yes, they take a little more risk by lending on higher loan-to-values, but they have back it up with reasonable debt ratio guidelines and sound Fixed and Arm products. They don’t make negative amortization loans. And even with those borrowers who have lower fico scores, they compensate the risk with the appropriate rate.
A little flexibility and common sense: If a borrower is refinancing and happens to have very stable employment,excellent credit, low debts, and very low loan-to-value (30%), then let them have a interest-only loan or a 5 year ARM. But if another borrower had a BK discharge on their credit, but the debt ratio was 28%, and the loan-to-value is 90%,then that is someone who maybe could only qualify for a 30 year fully-amortized loan. If the borrowers aren’t qualifying due to the debt ratios, then maybe a 35 or 40 year loan would be the product that would fit.
Get things moving: The lenders are dealing with losses, but they can help on their end by making sound products that help borrowers with purchasing or refinancing. This could save jobs as the lenders are able to make more loans and increase volume. Taking some risks and making sure the products are sound might help to get the financial institutions moving again. 
