Home Affordable Refinance Program (HARP) Extended One Year

The Home Affordable Refinance Program (HARP), a refinancing program administered by Fannie Mae and Freddie Mac, has been extended one year. It was set to expire June 30, 2011. The program expands access to refinancing for qualified individuals and families whose homes have lost value. In addition, Freddie Mac will exempt HARP loans from their recently announced price adjustments, and Fannie Mae will conform their eligibility date to May 2009.

In 2010, Fannie Mae and Freddie Mac purchased or guaranteed more than 6.8 million refinanced mortgages. Of this total, 621,803 were HARP refinanced with LTVs between 80 percent and 125 percent. This is up from 190,180 in 2009, when HARP began.

According to the National Association of REALTORS® the improving economy and job creation mean growing demand for commercial real estate. Vacancy rates in the office sector are expected to fall from 16.3 percent in the second quarter of this year to 15.3 percent in the second quarter of 2012. Office rents are projected to rise 0.3 percent this year and another 4.3 percent in 2012. In 57 markets tracked, net absorption of office space, which includes the leasing of new space coming on the market as well as space in existing properties, is likely to be 26.6 million square feet in 2011. Industrial vacancy rates are expected to decline from 13.9 percent in the current quarter to 13.0 percent in the second quarter of 2012. Annual industrial rent should decline 1.5 percent in 2011 before rising 2.0 percent next year. Net absorption of industrial space in 58 markets tracked is seen at 126.1 million square feet in 2011. Retail vacancy rates are forecast to decline from 13.1 percent in the second quarter of this year to 12.6 percent in the second quarter of 2012. Average retail rent is expected to decline 1.4 percent in 2011, and then rise 0.7 percent next year. Net absorption of retail space in 53 tracked markets is projected to be 5.4 million square feet in 2011. The apartment rental market – multifamily housing – is continuing to tighten as household formation grows. Multifamily vacancy rates should drop from 5.8 percent in the current quarter to 4.76 percent in the second quarter of 2012. Average apartment rent is likely to rise 3.4 percent this year and another 4.3 percent in 2012. Multifamily net absorption is forecast at 250,800 units in 59 tracked metro areas in 2011.

Republicans on the House Financial Services Committee have drafted a bill to raise the minimum down payment for Federal Housing Administration-back loans to 5 percent as well as cut FHA loan limits in many markets. FHA-backed loans are a main source of mortgages for first-time home buyers. Currently, home owners who take out FHA-backed loans are required to have a minimum down payment of 3.5 percent. As of now, the maximum size of FHA-backed loans in expensive areas of the country is set to drop to $625,500 from $729,750 as of October 1st and in less expensive areas, the limit may drop to $271,050.

Recently we have just honored our military veterans but we have also learned that Bank of America and Morgan Stanley have agreed to pay more than $22 million combined to settle federal civil charges on improperly foreclosing on military personnel. Mortgage lenders, between 2006 and 2009, foreclosed on 178 military members. The Servicemembers' Civil Relief Act offers protections to military personnel to prevent foreclosures. It bans evictions or creditors trying to repossess their property while on active duty. JPMorgan Chase earlier this year admitted to overcharging about 4,000 military personnel and foreclosed on 14. Settlement charges of $2 million were paid originally and last month paid more than $60 million to settle a class-action lawsuit regarding the overcharges.

A national survey conducted by Move Inc., indicates investors are expected to outnumber traditional home buyers three to one in the next two years. About two-thirds of investors say they expect the problems that first-time buyers are having with financing and getting mortgages will work in their favor in competing for properties. Twenty-two percent of investors expect prices to rise in the next six to 12 months, while 53 percent expect price to stay relatively flat. Nearly 60 percent of investors say they are new to real estate investing. About 33 percent are considering their first investment purchase and 8.5 percent are in the process of buying and selling their first investment property. Of those surveyed, according to Move Inc., only 36.5 percent had experience in more than one property transactions.

Richard Tegley is a REALTOR®/Broker Associate with the National Realty Group and a Director of the California Association of REALTORS® (C.A.R.) and a member of the National Association of REALTORS® (N.A.R.). He can be reached at (951) 533-9340 or email rt@richardtegley.com or www.richardtegley.com.

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