NeWS to KnOW

There's great news for homebuyers-  Home buyers hoping to tap into federal tax credits don't have to walk away from their future home if they haven't made it to the closing table yet. According to the Associated Press, Wednesday night the Senate approved a three-month extension giving homebuyers until Sept. 30 to close.

The home buyer tax credit program closing deadline was originally June 30.  Home buyers who had contracts by the April 30 deadline have been waiting for lenders to move forward on the deals. The extension would give them until Sept. 30 to close.

To be clear, this only applies to those who signed a purchase contract before the April 30th deadline but failed to close on the house.  They will now have until September to close. 

A new program, referred to as the Loan Quality Initiative (LQI), put out by Fannie Mae is an attempt to minimize the number of bad loans being created. This is a response to the surge in foreclosures since 2007. Most of the changes included in this program will not directly affect mortgage applicants. The initiative requires mortgage bankers to complete a few more steps prior to giving their clients final loan approvals and sitting down at the closing table. There is one major hurdle to consumers in the new program.

Mortgage companies are now required to do a credit score re-pull right before closing. This will make sure that the consumer’s credit did not change at all while the loan was in underwriting. Some of the changes that will be looked at include new lines of credit being opened and increases to existing credit or loan balances. If the new credit report reveals changes, the loan is subject to a complete re-underwrite and a possible turndown. The LQI is another layer of protection for the government agencies that often buy the loans.

In Birmingham, total residential sales in April 2010 totaled 1,061 units compared to 887 last year in April which is a 19% increase.  The average price of these sales was up 4% this April to $171,992.  Year-to-date total sales are up 7% so far in 2010.  Sales are trending up and so is consumer confidence.  As a bonus, interest rates remain low!!

This is all good news for our market!

According to the Wall Street Journal, the Federal Reserve sees improvement in the U.S. economy and therefore expects interest rates to stay low for an "extended period" of time.  After the two day meeting, the Fed said that they were in no rush to tighten economic policy since the economy is moving in the right direction. 

Keeping rates low will help energize the recovery!

According to the Wall Street Journal, major banks have been masking their risk levels the past five quarters.  They accomplished this by temporarily reducing their debt levels just before publicly releasing their debt data each quarter, only to boost their debt levels in the middle of the next quarter.

Excessive borrowing by banks was one of the major causes of the recent financial crisis.  Banks have become more sensitive about reporting high levels of debt and risk, worrying that their stocks and credit ratings may take a hit because of these levels.  This way of reporting data can give investors a skewed impression of the level of risk that banks are taking.

The SEC is investigating these practices.  More information is sure to come out of the investigation.  We are still not out of the woods...