• When beginning the house hunt, some buyers go in blindly, not knowing how much house they can afford.  Without this knowledge, buyers may find themselves viewing houses that aren’t within their budget.  To prevent buyers from spending time viewing homes they may not be able to afford, real estate experts advise home buyers get pre-approved by lenders before house hunting.  By providing copies of a recent credit report, W-2s, pay stubs, and bank and brokerage statements to a lender, buyers will have a better idea of the price range they can afford.
• Many financial and real estate advisors also recommend home buyers create long-term budgets to help create guidelines for affordable mortgage payments and long-term homeownership costs.  Most experts advise clients to devote no more than 30 percent of their monthly household income toward housing costs, which should include mortgage principal, interest, taxes, and insurance.  Numerous worksheets are available online to help consumers calculate how their income, debts, and expenses may affect the amount they can afford each month for the next 15 to 30 years.

New York Times - Owning a house remains central to Americans’ sense of well-being, even as many doubt their home is a good investment after a punishing recession.

Nearly nine in 10 Americans say homeownership is an important part of the American dream, according to the latest New York Times/CBS News poll. And they are keen on making sure it stays that way, for themselves and everyone else.

Support for helping people in financial distress over housing is higher than support for helping those without a job for many months.

Forty-five percent of the respondents say the government should be doing more to improve the housing market, while 16 percent say it should be doing less. On the politically contentious issue of direct financial assistance to those having trouble paying their mortgages, slightly more than half of those polled, 53 percent, say the government should help. And almost no one favors discontinuing the mortgage tax deduction, a prized middle-class benefit that has been featured on some budget-cutting proposals.

President Obama, who has been criticized for both doing too much to help the housing market and for not doing enough, was given poor marks. Only 36 percent of those polled approve of what Mr. Obama has done, while 45 percent disapprove.

In assessing blame for the housing crash, people are increasingly seeing financial institutions as the central culprit. Amid the swirl of recent disclosures about banks following improper and illegal procedures in pursuing foreclosures, 42 percent blame lenders, while 29 percent blame regulators. When the question was asked in early 2008, as the crisis was still building, the numbers were reversed, with 40 percent blaming regulators and 28 percent blaming lenders. Only a handful of respondents at either moment blamed the borrowers themselves for taking loans they could not afford.

“I believe the financial institutions willingly and knowingly allowed people to apply and receive credit at a rate higher than they could afford and this has degraded our economy,” said Steven Goode, an environmental health manager in Las Vegas, in a follow-up interview.

Making an offer for a house, something often done in past generations with little apprehension, is now riddled with worry. Only 49 percent call it a safe investment, while 45 percent feel it is risky. In a market where prices are consistently dropping, there is no easy exit.

“For the average person, it might not be a good idea today to buy,” said another respondent, Beth Lovcy of Troutdale, Ore., who bought a year ago. The value has already shrunk, but Mrs. Lovcy is unfazed. “It works out better financially than renting now because we can claim the interest on the mortgage.”

As the housing market slumped over the last few years with a speed and magnitude not seen since the Great Depression, aspects of homeownership have been debated as never before. There are tough questions about the role the government should take. These include how much of a down payment lenders should demand, whether lenders should be restrictive or expansive in granting new loans, how much assistance to give those on the verge of foreclosure, and whether real estate will ever again be the retirement savings vehicle it once was.

While the debate has been loud, there was little evidence of people’s views that went beyond the anecdotal. This poll offers a window onto widespread opinions at a critical juncture.

Before the crash, housing was widely deemed one of the safest possible investments. Few experts thought there was the possibility of a nationwide downturn. But after it happened, the effects were widespread and painful.

Diane Sherrell, a substitute teacher in North Carolina who retired on disability, traded up to a bigger house four years ago to accommodate an adopted son. “It’s been very difficult since then and we’re barely making it,” she said.

Half of those surveyed say the market’s continuing downward spiral has affected their long-term plans. One in five people say the crisis has prevented them from moving to another city or taking a different job. Nearly one-quarter of homeowners say their home is now worth less than what they owe on their mortgage, a condition known as being underwater. Families in this predicament are much more prone to foreclosure if they suffer job losses or other setbacks.

Over all, people are bleaker about the economic outlook than those surveyed in October. While most still think the current downturn is temporary, those saying it is permanent rose to 39 percent, up from 28 percent.

In the last two years, the stock market has recovered strongly while house prices have gone sideways at best. Yet those polled dismissed stocks as a long-term savings vehicle in favor of a savings or money market account (22 percent), a house (26 percent) or a 401(k) or individual retirement account (41 percent).

Who should be helped to buy is another contentious issue. Whether buyers need to come up with a 20 percent down payment — the standard for decades, but beyond the reach of many families now — is hotly debated. Fifty-eight percent of respondents say lenders should require this, while 36 percent say they should not.

People who cannot pay their mortgage are foreclosed upon. If they can pay but feel that doing so is pointless on a property that has lost so much of its value, it is called strategic default. While two-thirds of Americans say strategic default is not justified, 28 percent think that it is.

When houses are abandoned for any reason, it causes trouble for the neighbors. Three-quarters of those surveyed say foreclosures are a problem in their communities.

“Our home is worth much less now because houses are foreclosing around us,” said William Mack, an assembly line worker in Taylor, Mich.

Beyond all these ills, however, a persistent belief endures that the market will eventually improve and housing will regain its traditional importance.

Donna Boyd, a transportation supervisor in Cuyahoga Falls, Ohio, acknowledged “it might take a long time” for property values to go back up.

“But I don’t think I’m throwing my money away,” she said in a follow-up interview. “I rented for years when I was younger, and I just don’t like the idea of putting money in someone else’s pocket for something I will never own.”

The nationwide telephone poll was conducted June 24-28 with 979 adults and has a margin of sampling error of plus or minus three percentage points for all adults.

New York Times - WITH interest rates low, biweekly mortgage payment plans are looking less attractive than ever.

If you have recently taken a mortgage, you are likely to receive solicitations pushing these plans, from your own lender or a third party. The pitch is that for a few hundred dollars up front, you can painlessly save thousands in the long term on interest, simply by having half your mortgage payment debited from your bank account every two weeks, instead of paying monthly.

For years, financial advisers and consumer advice columnists have offered the same caution about such plans: Don’t pay to participate. You can achieve the same results yourself at no cost.

“I would never pay a bank for that option, because basically a biweekly is sending in one extra payment a year,” Robert B. Walsh, a principal of Lighthouse Financial Advisors in Red Bank, N.J., said of the payment plan.

The 26 every-other-week payments each year are the equivalent of 13 monthly payments, and the extra cash goes to cut your principal, allowing you to pay off the loan earlier. How much earlier depends on your interest rate. If you had a 30-year fixed-rate loan at 7 percent — outrageously high these days — you would pay it off in 23.9 years, and save $33,555 in interest on each $100,000 of principal, assuming you began biweekly payments right after you took out the loan. With the same loan at 4.5 percent, payoff would require 25.7 years and save just $13,619.

Citibank calls its BiWeekly Advantage Plan “a faster way to build your home equity.” The plan charges a $375 enrollment fee, plus $1.50 per draft. Other biweekly plans, including third-party payment services, charge similar amounts. Some lenders, including Wells Fargo and Bank of America, offer biweekly plans free to customers who pay from an account with that bank.

Citibank acknowledges the do-it-yourself advice. “Some homeowners try to make extra principal payments themselves, but most aren’t able to keep a consistent schedule,” the bank says on its Web site.

Nonetheless, technology makes such payments particularly painless. If your lender offers direct payments via an online site, it will let you add extra principal to the payment. Add an amount equal to one-twelfth of your monthly payment, and don’t think of it again.

If you physically mail a check each month, you’ll have to think some, but not a lot. Your payment coupon has a line where you can write in the additional principal amount you are paying.

Asked why Citibank offered biweekly payment plans, Mark Rodgers, a spokesman for Citigroup, said it is “a matter of client preference” and pointed out that some clients do not bank online.

Albert Engel, an executive vice president of Valley National Bank in Wayne, N.J., distinguishes between payment plans, which he calls “synthesized biweekly mortgages,” and the biweekly loans his bank offers. Those loans are amortized biweekly, in contrast with most payment plans, which accelerate payments without changing the underlying monthly accrual schedule.

That is, while you pay each two weeks, nothing is credited to your account until the monthly due date. Valley National’s loans credit those payments every 14 days, for a slightly faster payoff.

At today’s rates, few customers choose biweekly loans, Mr. Engel said. Still, “it remains a standard product for us,” he said. “As rates increase, we expect this program will become much more fashionable.”

Mr. Engel is particularly dismissive of third-party payment plans, saying borrowers are “foolish” to pay a fee. If nothing else, he suggests a low-tech alternative. “Write a check for half the mortgage each two weeks, and put it in a coffee can.” Each month, send two checks from the coffee can. At the end of a year, there will be two extra checks; send those.

“In effect,” he said, “they are doing the same thing a lot of these entities are charging to do.”

Wall Street Journal – Credit rating agencies S&P and Experian have a report out that suggests that slowly but surely, the rate of mortgage default among U.S. homeowners is going down. The latest numbers, from May, show that the agencies’ indexes tracking defaults on first and second mortgages both fell nearly a tenth of a percentage point, to 2.09% and 1.42%, respectively, from the previous month. A year ago, both measures were much higher, at 3.45% and 2.41%, respectively for first and second mortgages.

The report notes that default rates, which are strongly tied to high levels of unemployment, vary from region to region, and that in markets where the housing recovery has been more robust, such as Los Angeles, default rates are much lower than in markets where the market is still in serious trouble, such as Miami.

S&P and Experian say that these figures indicate that American consumers are slowly but surely mending their finances. This perspective is supported by a recent report from data provider Lender Processing Services, which reported that in April, foreclosure starts – which are triggered by defaults – were at their lowest level years. But LPS also noted that there is still a full pipeline of loans that are either in foreclosure currently or delinquent by 90 days or more, meaning they are likely to fall into foreclosure.

The combination of homes with loans in default, homes with loans that are delinquent and likely to fall into foreclosure, and homes held on bank balance sheets after being seized through foreclosure, is commonly referred to as the “shadow inventory,” which realtors and economic policy makers regard as a sort of sinister monster hiding in the attic that will ravage home prices if it’s let out into the market too quickly.

On Wednesday, CoreLogic Inc. released yet another report – its monthly measure of shadow inventory. CoreLogic says shadow inventory is on the decline – down from 1.9 million to 1.7 million in April, compared with a month before.

CoreLogic’s estimates of shadow inventory are typically at the low end of the range reported by economists and researchers (some estimate that the number of units in the shadow inventory is closer to 4 or 5 million), but the company also recently estimated that 22.7% of all homes in the country have “negative equity,” meaning their owners owe more on than their mortgages than the value of the house, another indicator that default may be likely. The level of upside-down borrowers has remained fairly consistent, at between 20 and 25%, for the last two years, which should be another scary sign for lenders and policy makers concerned that we might see another wave of defaults if unemployment ticks up again.

So what’s going on here, exactly? Are U.S. homeowners really getting their shops in order and mending their financial heath?

Maybe. But even so, one thing remains clear: Between the still-fat shadow inventory pipeline and a high number of underwater borrowers, there are still storm clouds on the horizon.

CNN Money - The downward cycle in home prices broke in April after eight consecutive months of decline, according to a survey released Tuesday.

According to the S&P/Case Shiller 20-city index, prices rose 0.7% compared with March, although they fell 0.1% when adjusted for the strong spring selling season. Prices were down 4% year-over-year.

“In a welcome shift from recent months, this month is better than last — April’s numbers beat March,” said David Blitzer, S&P’s spokesman, in a statement. “However, the seasonally adjusted numbers show that much of the improvement reflects the beginning of the spring-summer home buying season.”

“It is much too early to tell if this is a turning point or simply due to some warmer weather,” Blitzer added.

Any hint of good news in the troubled housing market will likely bring cheer to the industry, and there are some signs that market conditions are not quite as dire as some of the other statistics may indicate. Foreclosures, for example have been falling.

That has translated in a decline of 16% in the sales volume of distressed properties this year, while volume of non-distressed sales rose 11%, according to Joseph LaVorgna, chief economist for Deutsche Bank.

That’s good news because much of the price drop over the past year can be blamed on severe price slashing for homes in foreclosure, as Federal Reserve chairman Ben Bernanke pointed out in a press conference last Wednesday. Prices for homes sold by regular sellers have held up much better.

Foreclosures down for seventh straight month

“That suggests,” said Bernanke, “if we can reduce the current number . . . maybe 40% of home sales, which are on a distressed basis, that would do a lot for stabilizing the market and helping give people confidence that they can buy and not be buying into a falling market.”

Still, the fact that prices perked up in April is not necessarily something to write home about, said Mike Larson, a housing market analyst for Weiss Research.

“It happens every spring,” he said “It’s very clear there’s a seasonal component. Even non-statisticians can see that. The report was, however, better news than what people were expecting.”

Metropolitan Washington continued to be the strongest of the 20 cities covered by the report. Prices rose 3% in April there and have been on the plus side year-over-year, up 4%.

Foreclosures for sale: Big supply, low prices

The worst performing market for the month was Detroit, where prices fell 2.9%. The biggest year-over-year drop was recorded by Minneapolis, where prices have plunged 11.1% since last April.

The big picture is that a housing market recovery has yet to gain any steam, according to Larson.

“We’re not falling off a cliff anymore, but we’re only going sideways,” he said.

The year-over-year price comparisons could start to become more favorable, according to LaVorgna. For many months, price changes have looked worse than they might actually have been because they were being compared to months when the home buyer tax credit was in effect, which boosted prices.

“[W]ith the homebuyer tax credit having expired in June 2010, we will soon be getting “clean” housing data unencumbered by artificial distortion,” he said.

The New York Times – WHEN we lived in London, we bought a Victorian home that hadn’t been touched since the 1970s. In fact, the electrical wiring was so tangled and potentially dangerous that several qualified electricians declined to work on it.

Mario Barbuto, a general contractor for the last 25 years, says he’s happy to ask former customers if he can do a walk-through for potential clients.
Then, we did everything you’re not supposed to when planning construction. We hired a contractor who had previously worked on our apartment building without checking references. We had no idea if he was licensed. We started the project when I was six months pregnant.

Still, despite some setbacks, the project was finished on time. In fact, the living room floors were being varnished when I was in the hospital giving birth. The place looked good, and we even received a baby present from Dave, our contractor.

Dumb luck. And dumb might be the operative word here. As more people are turning to remodeling instead of moving — and with the decline in new construction meaning more eager contractors to chose from — it makes sense to know how to choose a general contractor.

“People shop for cars more carefully than contractors,” said Mario Barbuto, who has been a general contractor for the last 25 years in the New York area.

A remodeling experience gone wrong can make your life hell. Patricia Maier, a retired teacher, signed a contract in July 2008 for an addition to her house in Lexington, Mass., which was built in 1884.

Almost three years later, she is still coping with a job that was supposed to take four months. She hired an architect who was the husband of a colleague and used a general contractor he suggested.

The builder quickly did much of the exterior work, then took a 10-day trip to the Caribbean. Things never got back on track. Newly installed floors warped, were reinstalled and warped again. French doors that had been put in weren’t sealed correctly. Gutters didn’t drain properly. The architect dropped out of the process.

“Things looked good superficially but there were so many problems,” she said. Now Ms. Maier is seeking redress through various state offices.

“Never hire a friend,” she said, referring to the architect. “It will always backfire.”

Do you even need to hire a general contractor?

No, said David M. Dillon, a general contractor based in Dallas. Any competent person can oversee construction, he said. But if several subcontractors are involved, a lot of time will be spent by a homeowner managing details and personalities.

Should you decide you want a general contractor to run your project, how do you find one?

Word of mouth is always a good option, as is contacting your local government’s public works and building departments.

“They’re full of opinions about who is good and who is not. They’re looking at their work every day,” said Mr. Dillon, who has self-published a book this year called, “Homeowners, It’s Time to Think Like a General Contractor.” (CreateSpace, $7.99)

Online referral sites are another option to find contractors. Some are free, but Angie’s List, which is one of the better known, charges membership fees. The cost starts at under $10 a month, and opinion online is divided on how good these sites are.

After narrowing down a list, what do you do? Most people would say ask for references and photos of previous work, but that’s just the beginning. References are important, but how do you know they’re genuine customers? Web site photos are nice, but a lot can be hidden.

So it is much more important to ask to physically see work that has withstood the test of time.

“I show jobs that are six or seven years old, because new jobs always look good,” Mr. Barbuto said. And he’s happy to ask former customers if he can do a walk-through for potential clients.

“After all, everything looks pretty in a picture,” he said.

When visiting a completed project, take the time to talk to the owners there and get a sense of how happy they were with their contractor.

Los Angeles Times – Reporting from Washington— Consumer confidence fell in June to the worst level in eight months on concerns about employment and income, the Conference Board reported Tuesday.

The nonprofit organization said its consumer confidence index fell to 58.5 in June from an upwardly revised 61.7 in May. Economists surveyed by MarketWatch had expected a June reading of 60.5.

Related
End-of-quarter shifts on Wall Street push stocks higher; Treasury bonds get dumped
“We take this as another sign of the cooler economic conditions that we judge likely to prove transitory,” David Resler, chief economist at Nomura Securities International, wrote in a research note.

Generally when the economy is growing at a good clip, confidence readings are at 90 and above.

“Consumers rated both current business and labor market conditions less favorably than in May, and fewer consumers than last month foresee conditions improving over the next six months,” Lynn Franco, director of the Conference Board’s consumer research center, said in a statement.

Inflation rate expectations for 12 months declined to 6% in June from 6.5% in May.

The expectations barometer fell to 72.4 in June — the lowest since October — from 76.7 in May. The portion of those expecting more jobs in six months fell to 14.2% in June from 16.7% in May, while most expect the same employment. Those expecting income to decrease rose to 16.5% from 15.1%, while most expect income to remain the same.

The present situation gauge fell to 37.6 in June, a three-month low, from 39.3 in May. Those saying business conditions are “bad” ticked higher, and those saying jobs are “not so plentiful” also gained.

The percentage of respondents with plans to buy an automobile within six months fell to 10.7% in June from 13.7% in May. Those with plans to buy a home fell to 3.7% from 5.5%, and those within plans to buy major appliances declined to 47% from 47.9%.

CNN – Housing can’t recover if property taxes keep going up. Cash-strapped governments should look elsewhere to fill budget gaps.
FORTUNE – During the housing boom, governments enjoyed windfalls from property taxes tied closely to home prices. But since the real estate bubble burst, the revenue stream officials had come to rely on to help pay for everything from education to roads has dried up.

Officials have responded by embarking on everything from delaying road projects to freezing hiring and salaries and cutting public employees.

In addition to cutting expenses to cover budget shortfalls, governments have been forced to look for ways to raise more money. And increasingly, that’s resulting in higher property taxes – which experts warn could actually hurt more than help public finances. Everything from high unemployment to record foreclosures are already hampering the real estate market, and since higher taxes add to the costs of a home, it could also make owning even less appealing.

In a 2011 survey of U.S. counties, 15% reported raising such taxes – an increase from the 10% reported during the previous year. The survey by the National Association of Counties also found that property taxes, which account for almost three-quarters of all tax revenue collected by municipalities, was one of the biggest reasons why governments were experiencing revenue shortfalls.

Last year, Miami-Dade County raised rates to deal with a $444 million budget gap in the face of plunging property values. So did the city of Austin, TX. And earlier this month, the Philadelphia City Council hiked up its tax rate for a second year in a row to help bail out its cash-strapped school district. More broadly, the amount of money state and local governments collected from property taxes between 2006 and 2008 surged from $364.5 billion to nearly $410 billion, according to the U.S. Census Bureau.

To be sure, the tax bump isn’t happening everywhere. At a time when millions of Americans are still jobless, many elected officials haven’t mustered the political will to raise costs for homeowners and would rather delay road projects instead. It seems Miami-Dade County Mayor Carlos Alvarez learned this all too well when voters in March ousted him out of office following several missteps culminating in the city’s hike on property taxes.

But for governments trying to make up for the shambles of the housing market, those same efforts could very well prove self-defeating. If not for their political career, then likely the housing market.

“Given the situation we’ve been in for the past few years, increasing property taxes is not likely to aid in the short-term recovery of the housing market,” says McKay Price, real estate finance expert at Lehigh University.

But a rise in property taxes doesn’t always lead to a fall in home prices. It depends how much taxes are raised and if the additional tax dollars go toward things that support property values, such as good schools, parks, roads and other public infrastructure.

Many governments are faced with a dilemma. Following years of too much spending, officials find themselves having to rapidly cut services. In the National Association of Counties survey, nearly half of respondents reported delaying purchases and repairs, as well as capital investments to address revenue shortfalls. About 41% reported halting new hires, 45% froze employee salaries and pay, while 52% gave furloughs. About 34% reported delaying infrastructure repairs, while 31% delayed construction projects.

So for those municipalities considering asking homeowners to pay more, it might be time to think a little more long-term.

The New York times – The nation’s two biggest providers of reverse mortgages are no longer offering the loans, as the economics of the business have come under pressure.

Wells Fargo, the largest provider, said on Thursday that it was leaving the business, following the departure in February of Bank of America, the second-largest lender. With the two biggest players gone — together, they accounted for 43 percent of the business, according to Reverse Market Insight — prospective borrowers may find it more difficult to access the mortgages.

Reverse mortgages allow people age 62 and older to tap what may be their biggest asset, their home equity, without having to make any payments. Instead, the bank pays the borrowers, though they continue to be responsible for paying property taxes and homeowner’s insurance.

But the loans have increasingly become a riskier proposition. Banks are not allowed to assess borrowers’ ability to keep up with all their payments, and more borrowers do not have the wherewithal to stay current on their homeowners’ insurance and property taxes, both of which have risen in many parts of the country. At the same time, borrowers have been taking the maximum amount of money available, often using it to pay off any remaining money owed on the home. Yet home prices continue to slide.

“We are on new ground here,” said Franklin Codel, head of national consumer lending at Wells Fargo. “With house prices falling, you reach a crossover point where they owe more than the house is worth and it creates risk for us as mortgage servicers and for HUD.” He was referring to the Department of Housing and Urban Development, whose Federal Housing Administration arm insures the vast majority of these loans through its Home Equity Conversion Mortgage program.

As a result, banks are seeing a rise in what are known as technical defaults, when homeowners fall behind on their taxes or homeowner’s insurance, both of which are required to avoid foreclosure. According to Reverse Market Insight, about 4 to 5 percent of active reverse mortgages, or 25,000 to 30,000 borrowers, are in default on at least one of those items.

Bank of America, meanwhile, said that declining home values made fewer people eligible for reverse mortgages. So it decided to redeploy at least half of those working on the mortgages to its loan modification division, which has been criticized for failing to help enough homeowners on the brink of foreclosure.

For Wells Fargo, however, the inability to assess borrowers’ financial health was the biggest factor for exiting the business. Anyone over the age of 62 with enough home equity can take out a reverse mortgage, regardless of their other income. The amount of money received is determined by the borrower’s age, the amount of equity in the home and prevailing interest rates.

“We are not allowed, as an originator, to decline anyone,” added Mr. Codel of Wells Fargo. We “worked closely with HUD to find an alternative solution and we were unable to find one with them, which led to this outcome.”

Reverse mortgage borrowers are required to pay premiums for mortgage insurance, which protects the lender if the homes are ultimately sold for less than the mortgage value, since the government is required to pay the difference to the lender. The premium rates were increased last October to account for declining home values (though one sizable upfront mortgage premium was eliminated to make the loans more attractive to certain borrowers).

But lenders are responsible for making tax and insurance payments on behalf of delinquent borrowers until they submit an insurance claim to HUD, at which point the agency would be responsible since it provided the insurance against default.

In January, HUD sent a letter to lenders and reverse mortgage counselors that provided guidance on how to report delinquent loans to the agency, and what steps the lenders could take to get borrowers back on track, like establishing a realistic repayment plan that could be completed in two years or less, or getting a HUD-approved mortgage counselor involved to help come up with a solution. If one cannot be reached, the lenders must begin foreclosure proceedings.

Both Wells Fargo and Bank of America have said they have not foreclosed on any borrowers to date.

The National Reverse Mortgage Lenders Association, the industry group, said it has been working with HUD to come up with procedures that would allow lenders to assess a prospective borrower’s income and expenses, or at least require homeowners to set aside money to pay for taxes and insurance. A spokeswoman for HUD said the guidance is still being drafted.

As it stands now, borrowers are required to see a HUD-approved lender before they can apply for a reverse mortgage. As part of that process, consumers are educated on the nuts and bolts of how the loans work and what their responsibilities are, including that they need to be able to continue to pay taxes, insurance and keep the property in good repair.

“We don’t tell consumers what decision to make, but we do try to give them the tools to make a decision,” said Sue Hunt, director of reverse mortgage counseling at CredAbility, a nonprofit consumer credit counseling agency. She added that their sessions last about an hour and 15 minutes, on average. The counselors also look at the consumer’s budget to see if it is sustainable with the mortgage, as well as what circumstances might arise that could throw the borrower off track.

“Outside factors are affecting people who thought five or six years ago that they were in pretty good shape,” she added. “The world has changed a bit around them.”

In days past, the borrower would get the reverse mortgage, and equity would continue to build, experts said, which would provide borrowers with more options — like refinancing — should they fall on hard times. Declining home values have changed that calculus for both bankers and consumers. Borrowers have not been able to pull out as much money. At the same time, the government has also tightened its withdrawal limits.

There were a total of more than 50,000 reverse mortgages, totaling $12.66 billion, made industrywide since last October, according to HUD.

Both Wells Fargo and Bank of America will continue to service their existing reverse mortgages. And the reverse mortgage association has said it will work with its members to ensure that senior citizens who need the loans can get them, though some experts said that less competition could increase certain fees.

“There is a certain amount of the business done by Wells and Bank of America that happens because of their bank branches, brand names and large sales forces,” said John K. Lunde, president of Reverse Market Insight. “We would expect something more than half of their volume to be absorbed by the rest of the industry, with something less than half not happening.”

Wells Fargo, which said that reverse mortgages represented 2.2 percent of its retail mortgage business, employs about 1,000 reverse mortgage workers. They are being given a chance to find other positions at the bank. Bank of America said that about half of its 600 workers have been reassigned within the bank. MetLife, the third-largest provider of reverse mortgages, declined to comment on its business.

Orange County Register - Unless Congress takes action, the current loan limits will expire on Sept. 30 and the cost of a mortgage could rise significantly, especially in high-cost areas such as California.

Making sense of the story

• More than 30,000 California families could face higher down payments, higher mortgage rates, and stricter loan qualification requirements if conforming loan limits on mortgages backed by the Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac are reduced beginning October 1, 2011, according to analysis by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). 
• The conforming loan limit determines the maximum size of a mortgage that FHA, Fannie Mae, and Freddie Mac government-sponsored enterprises (GSEs) can buy or guarantee. 
• Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan and require a higher down payment, increasing the monthly payment and negatively impacting housing affordability for California home buyers.
• C.A.R. and the NATIONAL ASSOCIATION OF REALTORS® (NAR) have long advocated making permanent higher conforming loan limits.  As a result of C.A.R.’s and NAR’s efforts, in 2008, Congress temporarily raised the conforming loan limits from $417,000 to $729,750 and has extended them annually through fiscal year 2011.

To see the impact the lower limits would have on various regions throughout the state, please visit 

Unless Congress takes action, the current loan limits will expire on Sept. 30 and the cost of a mortgage could rise significantly, especially in high-cost areas such as California.

Making sense of the story

• More than 30,000 California families could face higher down payments, higher mortgage rates, and stricter loan qualification requirements if conforming loan limits on mortgages backed by the Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac are reduced beginning October 1, 2011, according to analysis by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). 
• The conforming loan limit determines the maximum size of a mortgage that FHA, Fannie Mae, and Freddie Mac government-sponsored enterprises (GSEs) can buy or guarantee. 
• Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan and require a higher down payment, increasing the monthly payment and negatively impacting housing affordability for California home buyers.
• C.A.R. and the NATIONAL ASSOCIATION OF REALTORS® (NAR) have long advocated making permanent higher conforming loan limits.  As a result of C.A.R.’s and NAR’s efforts, in 2008, Congress temporarily raised the conforming loan limits from $417,000 to $729,750 and has extended them annually through fiscal year 2011.

To see the impact the lower limits would have on various regions throughout the state, please visit the CAR.org website.