The Nationwide Mortgage Licensing System and Registry launches NMLS Consumer Access Website

The Office of Consumer Affairs and Business Regulation announced that the Nationwide Mortgage Licensing System and Registry (NMLS), a mortgage licensing system operated by state financial regulators including the Massachusetts Division of Banks, launched the “NMLS Consumer Access”. There hope is that it will help protect mortgage shoppers from unscrupulous loan originators.

NMLS Consumer Access is a fully searchable single-source consumer access website that allows the public to verify state-licensed mortgage lenders, brokers and individuals currently licensed through NMLS. Future updates to NMLS Consumer Access will provide a record of applicable disciplinary actions taken against a licensee by any jurisdiction in the country.

The NMLS Consumer Access website was finally launched in January 2010 and the NMLS Resource Center, claims the website will bring greater transparency to the mortgage industry and compliance with provisions of the SAFE Act.

The database of companies and individuals will be updated nightly and will tell consumers whether the person they're working with has had their license suspended or revoked in another state, and will list any aliases the individual has used since the age of 18. It will also seek to discover whether that person is engaged in other sidelines and what that person’s license status is in other jurisdictions.

You can download a .PDF pamphlet of Information about NMLS Consumer Access prepared by the NMLS Resource Center.

The Bottom Of The Market Feels Like A Bumpy Road

It’s the New Year, and just in time the banks are raising interest rates, but just a little – so far. However, the banks are also relaxing their down-payment requirements because they are seeing increased confidence in the housing market. The truth, according to one banker friend I spoke with is because they are not making any money. They need to make loans to make money. In some markets borrowers can now borrow 95% of a property’s value. Of course one would hope this means property values are not going down any further and loan applicants are going to be scrupulously vetted?

Despite favorable sales figures as we finished out this year, Tim Warren Jr., CEO of the Warren Group sees home prices bouncing up and down along the bottom during the next 3-6 months, and possibly throughout most of 2010 even though sales figures will appear to continue trending positively. This is the way it was in the early 90’s as we pulled out of the last recession. Some economists call this an “L” recession. For sure the recovery is going to be slow, but I do think it is safe to say we are at the bottom albeit a bumpy bottom. I believe in making a decision about when is the best time for you to buy an investment property one indicator you should pay attention to is interest rates. When interest rates go up this can herald the onset of an inflationary period.

Warren feels it was the rush to take advantage of the initial first-time home buyer tax credit by signing contracts before November 2009 expiration that contributed the biggest boost to the market. Wednesday’s WSJ reported that first-time buyers made up 51% of purchases in November, according to NAR. The initial first-time home buyer tax credit has been extended and broadened to include more potential buyers which may once again give a boost to the housing market. Contracts have to be signed by April 30, 2010 with closing dates on or before June 30, 2010. According to Carl Reichardt, an analyst with Wells Fargo, “The spring selling season would be critical to determining whether a possible double-dip is at hand, or whether housing’s recovery will regain steam.”

Tim Warren believes another reason for the upturn is the brighter unemployment figures in Massachusetts which in turn enhance consumer confidence. Okay, but one of my sources tells me the actual national unemployment figure is above 17%, if you factor in the non-registered ‘shadow’ unemployed.

News Flash: Massachusetts unemployment rate drops slightly from 8.9% to 8.8%
Read about it here > http://www.businessconnector.biz/news/show/523

In January, it is predicted that 1,000,000 unemployed workers will lose their benefits. Another prediction is going to be a surge in commercial foreclosures as more companies lay off workers and close doors in leased office spaces. But who knows? I still believe in miracles.

Great News for Martha's Vineyard Home Buyers!

First-Time Home Buyer Tax Credit

President Obama signed the Homebuyer Tax Credit into law after overwhelming votes for it in Congress. The credit takes effect as of November 6, 2009. To be eligible, a purchase contract must be signed by April 30, 2010, and close on or before June 30, 2010. This is a very narrow window of opportunity so pay attention and don't miss out.

Not only is the existing $8,000 tax credit for first-time homebuyers extended but a new "Homebuyer Tax Credit" of up to $6,500 for some existing homeowners has been added. The reduced credit would be available to all homebuyers who have been in their current residence for a consecutive five-year period in the past eight years.

The qualifying income limits are being raised to $125,000 for single taxpayers and $250,000 for joint taxpayers, from the current $75,000 and $150,000.

Martha’s Vineyard Land Bank “M” Exemption

In an effort to stimulate home sales to first-time home buyers, the Martha’s Vineyard Land Bank has increased the credit amount of the “M” Exemption. The “M” Exemption is a credit given only to eligible first-time home buyers toward the Land Bank Fee of 2% of the purchase price of real estate on Martha’s Vineyard.

Prior to September 1, 2004, the “M” exemption was $100,000 and in order to qualify all parties on the deed may not have ever owned real property at any time, not just on Martha’s Vineyard but anywhere. Subsequently, it was increased to $300,000 and the exemption was available to first-time purchasers of real estate who will domicile on the property within two years and hold the property for at least five years from the date of transfer. In the case of spouses, either spouse can have owned or possessed an interest in real property prior to the time of purchase, but not both spouses. As of October 27, 2009, per a recent amendment to the land bank law, first time purchasers may now claim a $400,000 "M" exemption. All of the other requirements of the "M" exemption are unchanged.

Mortgage Interest Rates Remain Below 5%

Although inflation is an assumed and anticipated part of our future economic recovery, the Fed anticipating continued slow growth during the next few months voted the status quo for interest rates with their announcement this week that "economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period." Rates will stay where they are for now because the Federal Reserve group believes that even with economic growth ahead, it will be at a manageable pace.

On Martha’s Vineyard, for loans up to $417,000 you can get a 15-year fixed rate mortgage for 4.5%, with no points and a 30-year fixed with one point for 5.1%. 30-year loans are actually down by an eighth of a point at maturity.

Martha’s Vineyard Real Estate – Should You Be In The Market Now?

There are too many people who should not be in the real estate market right now, both buyers and sellers. They’re not serious, they are time wasters, and to me real estate is not a game.

If I were a seller’s agent, and I am not, and a home owner came to me asking me to list his property at a certain price that was out of line with my market research, and saying “let’s just try it for a while at this price”, I would say no thank you. Perhaps that seller is unable to sell his property at fair market value because he owes too much, and is upside down --- loan vs. current market. Perhaps that seller does not have to sell, but is just testing the waters or derives some pleasure at seeing his property advertised at a big number. It is sellers like this and the resulting skewed values and distorted inventory that create the negative public opinion and add to buyer’s misperceived impression of the market.

If a buyer came to me, and they do, saying they want to “steal a property”, I say no thank you. Pricing property is analogous to water seeking its own level. If you price a property too high, it will languish on the market until the price comes in line with the market. Across the country, 36% of all properties sold for list price or higher. Only 12% of all properties nationally sold for 90% or less than asking price. What this means is buyers continue to wait until properties are priced correctly. If you recognize that a property is priced correctly, you need to bid accordingly because properties that are priced correctly will normally sell quickly to a savvy buyer, and there may be more than one savvy buyer making a run on a property at the same time. Buyers must realize right now prices are good, interest rates are excellent and anyone with cash or excellent credit has power if they use it wisely in their negotiation. I’ve seen this too many times. Buyers who are eager and ready to get into the market, but continue to sit on the sidelines waiting for the ‘go signal’ from on high that prices have bottomed out are destined to join the ‘would have … should have’ club. You know who I am talking about, those people who painfully recount that they could have bought that property for ….

In the investment game, if you think you are at the bottom, or at the top, it is too late --- you are already on the other side. Right now is a great time to approach the market because the fruit on the tree is abundant and ripe. I don’t blame anyone for having doubts and fears; after all, the news these days is mostly negative and full of fear. I love what Louis Rukeyser once said about investing, no matter what you do, it is going to be wrong so do something, because the worst thing is to do nothing.

We need to remember real estate is cyclical and this too shall pass. Historically, the down-markets normally last two to three years and the up-markets last from seven to ten years. I believe we are walking in the valley right now, but we just don’t know it. It is going to be a long slow trek through the valley and we may not reach the mountain until the end of 2008, or the beginning of 2009, but we are on the march. One thing is for sure, real estate values overall continue to go up. Real estate is the one sure investment that always appreciates over time.

New Regulations Impose the Nation's Toughest Restrictions on the Mortgage Industry

In an effort to encourage mortgage lenders in Massachusetts to continue doing business here, on January 2, 2008 the Attorney General’s office imposed restrictions that require increased income documentation and a “reasonable belief” that a borrower can afford the loan they are applying for.
Follow this link to learn more > New Mortgage Rules in Massachusetts

Relief in Sight for Some Massachusetts Home Owners

You've all read countless articles and tales of woe and devestation caused by the subprime mortgage market debacle. The predatory behavior of many mortgage companies coupled by the lack of understanding of borrowers who either did not fully understand what they were getting into or were sold a bill of goods by the lenders has wiped out many homeowners.

In Massachusetts alone there are 24,650 adjustable rate mortgages due to reset at the beginning of 2008. However, there appears to be good news on the horizon for some > Subprime mortgage rates could be frozen for some .

In addition, an Associated Press release just reported that Governor Deval Patrick has signed a measure seeking to slow the state's recent spike in home foreclosures. According to the Governor, the new law gives Massachusetts one of the nation's most consumer-friendly mortgage lending statutes. The legislation requires mortgage companies to file a 90-day notice of intent to foreclose with the homeowner and the state. Borrowers would be required to receive consumer counseling before obtaining certain high-cost mortgages. Grants totaling $2 million would establish 10 education centers statewide and promote first-time home buyer and foreclosure counseling. (AP)

Federal Funds Rate Down Again

Today the Federal Reserve once again in less than two months lowered its target rate for the federal funds rate by a modest 25-basis-points to 4.5 percent and the discount rate to 5 percent.

In a statement announcing the Fed’s decision today, members of the Federal Reserve's Open Market Committee said that "after this action, the upside risks to inflation roughly balance the downside risks to growth."

Some analysts concerned that the housing downturn will lead to a recession were hoping for another 50-basis-point reduction in the federal funds rate, but the Fed has to weigh consequences such as further weakening of the dollar and inflation.

However, on Martha’s Vineyard, the mortgage market has little effect on our high-end market, because most real estate transactions are all cash.

GREENSPAN SPEAK(S)

If you watched the most recent interviews with Alan Greenspan you may or may not be pleased with what you heard. As for the housing bubble, Greenspan says it is a global problem and we still have some distance to travel before the market levels off. He said, “We, unlike the rest of the world, are showing some modest price declines.” When asked if a recession was on the horizon, his answer was, “The evidence so far, is not yet. The economy at this stage, despite this fiscal problem, despite the financial problem, is still holding up.”

In hopes of slowing the downturn in the housing market and lessening the credit crunch the Fed is expected to lower federal funds rates to at least 5.0 percent; it is now at 5.25%. However, Greenspan still sees a great deal of pain ahead for those who overextended during the boom. “I think we're going to have to go through this adjustment, as indeed all the other countries are in the process of going through it. There are going to be a lot of people who will have very tragic stories," said Greenspan.

It appears Greenspan is less optimistic about the economy than he was while writing his memoir, The Age of Turbulence, and estimates the probability of a recession at just above one-third. One of the problems, according to an interview published in the WSJ is the “very large” inventory of newly built and unsold homes resulting in increased pressure on builders to sell them quickly.

Martha's Vineyard for the most part is a high-end resort and second-home market where many expensive properties are sold without need for mortgage financing. However, in order to stave off inflation in the future, Greenspan said the Fed would most likely have to raise interest rates to double-digit levels for the first time since the 80’s, but that increase period would be short lived. If you are contemplating a real estate investment on Martha’s Vineyard and need financing, I think that prediction alone is a good reason to get into the market while the rates are low.

All Real Estate Is Local, but that has not been the perception?

In David Lereah’s new book, “All Real Estate Is Local”, he references the investment mistakes his Grandpa made by listening to the national news instead of paying attention to ”local influences and activity” He goes on to say, “Whatever the national trends are with regard to real estate – whether they are booming or busting – what really matters is what the market conditions are in your region, town, or neighborhood.” David Lereah is Senior Vice President and Chief Economist of the National Association of Realtors® (NAR).

Starting in 2001 real estate speculation began picking up steam in certain areas of the country that were growing in popularity. These areas were primarily coastal cities on the east and west coast. It would be five years before this trend would run its course. Investors were quick to jump on board with the hope of making a quick buck -- and they did. Properties were selling before a shovel touched dirt or a hammer struck a nail. We saw this in the 80’s here on Martha’s Vineyard when the construction and housing market was out of control, but we learned from that bad experience and won’t let it happen again.

When the press started reporting the news that the Boom was over, they did so by painting a national picture of doom and gloom with a broad brush. We all listened to the reports. Prospective buyers relished the thought of getting a good deal, “a steal”, and regaining control of what had been a so-called seller’s market that had all but shut out everyone except the well-healed from the Vineyard real estate market. Sellers, on the other hand, started to panic but refused to give up their position. They fervently resisted lowering what, in most cases, were overly inflated prices based upon subjective personal opinions instead of factual market price analysis provided by seller agents.

We entered a buyer-seller standoff period where nothing was happening, except at the very top of the market. But even there activity slowed down and sales were few and far between. No one wants to overspend and appear foolish regardless of how much they are worth. The wave of panic continued to build while rolling from coast to coast, and everyone was talking about a “buyer’s market” whether the perception was true or not.

On the Vineyard, sellers continued throwing chum at the market week after week in the form of insignificant price reductions. So like any good bargain shopper, buyers continued to wait, wondering how low the market would go. Personally, from the beginning I saw this as an opportunity for a leveling of the market and never believed the negative hype as it pertained to Martha’s Vineyard. Water seeks its own level and it would just be a matter of time, I thought, before we reached that point.

All of a sudden, but not by surprise, there was a new specter looming on the horizon. Was the housing bubble about to burst? Buyers had been led to believe there was no end in sight for the hot market and prices would just continue climbing. They were drawn into a false sense of security and anticipation of assumed future gains. Greed and some very creative financing products also encouraged buyers to overextend themselves by committing to attractive short-term, low adjustable interest rate loans. This enabled them to get into the market with little or no money down. But in some areas of the country the market suddenly came to a halt and prices started to decline. Frantic buyers not wanting to lose money immediately started canceling new home sales contracts and in many cases forfeiting substantial deposits.

With prices now plummeting by double digit percentages in many popular cities, and adjustable mortgage rates going up as much as double at the first reset, many new home owners found it easier to simply walk away from their homes purchased with up to 100% financed loans they could no longer afford. This was the case in cities like Boston, Cape Cod, Phoenix, Las Vegas, Los Angeles and Ft. Lauderdale where there had been overly zealous growth, but it was not that way throughout the entire country.

On Martha’s Vineyard the rate of appreciation was above average but not even half of what it was in the 1980’s. There were only a handful of speculators here that might have been in jeopardy. The Vineyard has always been a pricey market and that is not by accident. People who “get the Vineyard” are passionate about wanting to live here and make emotional decisions; quite often paying a premium to be part of the unique Vineyard lifestyle.

It was not only the home buyer who was affected by the slowdown in the market. Existing home owners who were courted and vigorously encouraged to take equity out of their existing homes for that dream vacation to Hawaii or that slick new Escalade were finding themselves in an unexpected upside-down or negative amortization position. The news of a threatened foreclosure glut loomed heavily on the horizon --- but once again we should have remembered --- real estate is local.

When a homeowner cannot maintain their mortgage or sell their home to save themselves, the end result is usually foreclosure and over a million home owners in the US are facing that end today. The foreclosure process begins when a borrower is over 30 days late with a mortgage payment. The lender will usually send a letter of notice to the borrower along with notification to the state’s Land Court notifying them of an action to foreclose. This does not imply a fait accompli, as most borrowers are able to work out the loan with the lender before they lose their homes. With prices continuing to decline in some areas, options have become more limited. However, in Massachusetts, the number of foreclosures is not even close to what it was in 1992. Government leaders are now calling for state and federal assistance to subsidize aide to home owners threatened with foreclosure.

Although Martha’s Vineyard is a wonderful and very special place, like all good things, greed can play a major part in pushing the envelope. We experienced a period for many years where everyone thought they had the goose that laid the golden egg. Many properties came on the market for ridiculous prices, both at the very top and at the very bottom of the market. Still, we relied upon the market to have the last word, but the astounding reality was that there was always someone who would pay the price. Today this is changing to a great extent not only because of the perception of a more level playing field or buyer’s market, but also because buyers are choosing to have their own agency representation.

So where are we today? I believe we are at a tipping point in the Martha’s Vineyard real estate market, but it will not be without a little more pain. One of my pet peeves is there are too many substandard, poorly maintained buildings of no important historic significance for sale here that have outlived their economic and functional usefulness. There is an old real estate expression, “underneath it all is the land”, and in many cases that is where the value is --- not what sits on the land. I maintain that many of the 40, 50 and 70 year old structures should be removed and replaced with more attractive energy efficient “Green” construction. Sellers have to realize they can no longer expect to get $400,000 to $500,000 for a property with a dilapidated house or unheated shack, when the value of the land is almost half of that selling price. Buyers need to realize they are not going to be able to “steal” properties. They must have confidence that if they pay a fair price for a property, they will have a solid investment that will appreciate in time, but not overnight.

We have to come to the realization on Martha’s Vineyard that this is not a buyer’s market, but an opportunity for a balanced market. A market where properties are priced fairly and sellers have realistic expectations. However, the lower to middle-end of the market is distorted because we still have a number of sellers who are not realistic or serious about selling their properties; they’re just fishing. Their perception of what their property is worth, albeit uninformed or ill-advised, overrides the facts. There are three phrases I constantly hear that always make me smile: “The seller is motivated”; “The seller doesn’t have to sell”, and “The price is negotiable”. What the heck does all that mean? Does it mean the motivated seller will accept well below market value or the non-motivated seller is firm on the price or will only accept above market value? Does anyone in the market today assume that prices are not negotiable?

The pool of qualified pre-approved buyers at the lower end or entry level of the Martha’s Vineyard real estate market is drying up. Lenders are adopting much stricter guidelines for buyers with limited resources and marginal credit. If you were pre-approved for a loan last year you may not be eligible for that same amount today. A larger down payment may be required and you will most likely not get a loan approval without verifying your income. If you are contemplating a purchase this year, save yourself disappointment and wasted time for everyone by going to a lender and getting pre-approved for a mortgage. Believe me, you are better off knowing your pocketbook will match your expectations. Negotiations are difficult enough today and being pre-approved will strengthen your bargaining position.

I’m the owner of SplitRock Real Estate, an EXCLUSIVE BUYER AGENCY and to paraphrase a statement from a REALTOR® sponsored national ad campaign, real estate is my life. I know my business; I study it and I’m passionate about it. My perspective is unique because I view the market from the buyer’s vantage point, and my goal is always to arrive at a fair deal. I will do my best to protect my buyer clients and will look after their best interests. My task is to educate and counsel my buyer clients so they can make informed decisions they will be comfortable with. I encourage you to begin or continue your real estate education at www.SplitRockRE.com .

Did you know you can deduct PMI?

President Bush has signed a new tax legislation change that makes private mortgage insurance deductible for low and moderate income buyers who don't have the standard 20% downpayment necessary to purchase homes this year.

Home buyers who have annual household incomes of $100,000 or less, purchasing homes in 2007 will be able to get a low down payment mortgage and deduct the full cost of their mortgage insurance premiums on their federal tax returns. The deduction is set to expire at the end of 2007, unless Congress opts to extend it. This is in addition to the mortgage interest tax deduction they already take.

A Look Back at the Real Estate Market on Martha’s Vineyard

Now that 2006 is just a memory, and for some not a very pleasant memory, we look forward to what 2007 holds in store. Will it be more of the same or a better year for real estate and the economy? Employment still remains high and unemployment benefit claims have been stable for the last few months despite troubles in the manufacturing sector precipitated by the fall off in auto sales and the continued slow down in the housing market. Interest rates peaked midyear and appear to have settled as the Fed continues to hold steadfast in hopes of keeping inflation in check.

Sales of new homes are up, prices of used homes are starting to inch up again and the bloated inventory is starting to deflate, albeit very slowly. In a recent article in the Vineyard Gazette several friends of mine were interviewed for an article titled “Median Home Prices Fall on Vineyard as Real Estate Market Begins to Stall”. I find the title laughable as we have been stalled for quite some time and only within the last few months has activity begun to pickup again as we appear to have reached a floor in the market, shaky as it may be. The media continues to hype the housing bubble giving most buyers uncertain pause as they don’t want to be foolish and enter the market prematurely. Everyone is waiting for that magic sign from above that will say, “Start your engines”.

I think the important points are prices have finally come down slightly and the inventory is up despite the fact that those numbers are going to be confusing and will require thoughtful interpretation. The middle range that Ms Purdy is discussing has always been the softest area in the market, regardless of how strong or weak the market has been. I still maintain that this is an excellent time to buy if you’re prepared to be patient and negotiate strategically. If sellers believe nothing is going to happen for another 6 to 8 months, don’t you think they will be more receptive to negotiation than if they knew better days were only weeks away? More inventory means more competition and more choices for buyers, and that’s a good thing. Furthermore, if we accept the idea that potential buyers are going to rent until they are comfortable enough to purchase, this creates a strong opportunity now for anyone buying an income property. Normally I don’t recommend factoring income potential into financing a property. However, at this time it appears all signs point toward a very strong rental market for 2007. When clients ask me if I think they could rent the property they’re interested in I tell them, “You can rent a tool shed here for $600.00 a week”.

Another important point to make note of is home prices are not out of line comparing other areas on the Cape, the North Shore and South Boston area; it’s the wages that are out of line related to the cost of living on Martha’s Vineyard. If you compare the same jobs on-Island and off-Island, the wages are lower here and that’s driving a majority of the year-round labor force away. We’re returning to more of a second home and retirement market, the way we were back in the 1960’s.

Finally, if you are wondering about foreclosure opportunities, as Chris Wells said, the delinquency rate has not increased. A mortgagor usually has to be 90 days out before a bank considers starting a procedure. All our local banks are pleased to say they have nothing currently on their radar. I also look at foreclosure reports and the properties I see usually work out. Banks are very eager to do business and are introducing products to help prospective buyers. One such product regaining favor with buyers who cannot afford the average down payment is the PMI (Private Mortgage Insurance) mortgage. This will replace the ARM piggyback loans that were so popular when interest rates were historically low and stabile. Ask your banker.

Is this a good time to refinance?

Although the housing market is still in decline in some areas of the country, low interest rates are spurring a record surge in loan applications for new homes and refinancing to get out of adjustable rate loans due for their first major adjustment.

(Click here to view>) Mortgage applications hit one-year high