38% of Homes Purchased in 2011 Bought with Cash

Despite record low mortgage rates, 2011 has seen an amazingly high-level of cash home purchases, according to the real estate research firm Hanley Wood Market Intelligence. No doubt that investors love that real estate environment and know that in the future they will be making big profits when real estate goes back up.

Jonathan Dienhart and Ken Lee, two analysts with the company, say between tight lending standards and a desperate search for yield by investors, cash purchases of homes – particularly for distressed properties – became even more common in 2011 than last year.
Dienhart and Lee analyzed data collected through Hanley Wood’s Housing IntelligencePro, and shared their findings in a blog post.

The two discovered that 38 percent of homes purchased in 2011 were bought with all cash. That’s up from 34 percent in 2010, and double the 19 percent rate in 2006.
According to Dienhart and Lee, this trend is likely to continue in the near term. They note that cash-paying investors are responsible for an increasing share of home purchases nowadays as prior homeowners abandon the ownership market and head back to rentals.

5 States With the Most Mortgage Fraud

Mortgage fraud continues to climb in the country as $1.3 billion in questionable loans surfaced in the third quarter, according to a mortgage fraud index by Mortgage Daily.

Florida continues to have the most cases of mortgage fraud, according to the index. In Florida alone, mortgage fraud activity included more than $144 million in loans that were questioned in court, and Florida’s mortgage fraud index soared 45 percent in the third quarter compared to the previous quarter.
The five states that had the worst index ranking with mortgage fraud cases, according to Mortgage Daily, are:

1. Florida
2. California
3. Minnesota
4. New York
5. Texas

10 States Hit Hardest by Foreclosures

The following are the top 10 states with the highest foreclosure rates in the country in November, according to RealtyTrac data.

1. Nevada: 1 in every 175 home received a foreclosure filing in November
2. California: 1 in every 211 homes
3. Arizona: 1 in every 256 homes
4. Utah: 1 in every 290 (This state saw a 74 percent increase in November from October in foreclosure activity.)
5. Georgia: 1 in every 330 homes
6. Michigan: 1 in every 330 homes
7. Florida: 1 in every 358 homes
8. Illinois: 1 in every 427 homes
9. Ohio: 1 in every 500 homes
10. South Carolina: 1 in every 517 (This is the first time South Carolina has made it into the top

BofA Considers Renting REOs Back to Previous Homeowners

In facing large inventories of foreclosures, Bank of America is considering a program that would allow investors to buy a foreclosed home and then rent it back to the former home owner, HousingWire reports.
Bank of America is looking for ideas on how to handle the large inventories of foreclosures in some areas where demand hasn’t picked up.

"We are looking at programs where you can capture somebody before the REO process and offer a deed-for-lease," Ron Sturzenegger, who leads the bank's legacy asset servicing division, explained to HousingWire. "We would go to the customer and say, 'We'll do a short sale. Will you be interested in leasing your property back? We're still going to sell the property. You will no longer be the owner. But you can be a tenant now in that same property and save you from moving on.'"

The program is still in very early stages and more details need to be worked out, Sturzenegger noted.

Monthly Mortgage Down About 40%

Improving housing affordability along with low mortgage interest rates means that home owners are paying a lot less these days for their monthly mortgage payment than they did just a few years back. Homeowners are paying nearly 40 percent less on their monthly mortgage payment than home owners paid in 2006.

According to Fiserv, the monthly mortgage payment for a median-priced single-family home today is $700, a drop of close 40 % from the high of the real estate market in 2006, when it was $1,140.

Housing affordability has improved dramatically because of declines in both prices and mortgage interest rates. Nationally, purchase mortgage payments now account for only 13 percent of monthly median family income, the lowest percentage on record (since 1971), and compared to 23 percent in the first quarter of 2006."

Credit Scores: 5 Things That Matter

Since your credit score is obviously super-important, and is derived from your personal credit history, you may feel justifiably confused by why you should have to pay 20 bucks to see it. The explanation for that I can summarize with one word: lobbying. The financial services lobby in this country is one of our democracy’s most powerful. To get a fair shake for consumers in virtually anything has always been an up-hill battle. In the case of getting a free look at your credit report, for example, it took years. In the case of being able to see your credit score, it hasn’t happened yet.

Payment history (35%) – This is your track record of paying back what you borrowed. Accounts in collection, late payments, and bankruptcy are bad; paying on time for a long period is good.

Amounts owed (30%) – This is based on the total amounts you owe, and the ratio of what you’re allowed to borrow to what you currently owe, called your “utilization ratio.” Maxing out your credit hurts it; keeping a lot of unused credit available helps it. Ideally, you want to keep your utilization ratio below 30 percent. So if you have a credit card with a $1,000 limit, you’d want to keep your balance below $300.

Length of credit history (15%) – This considers the length of time each credit account has been open, and when each account was last updated with payment or usage info. As you might imagine, the longer your history, the better. This is why if you’re going to cancel a credit card, all things being equal, ditch the newest and keep the oldest.

New credit (10%) – This includes recent inquiries and requests for credit. Regularly applying for new credit cards or other loans will cost you.

Types of credit used (10%) – There’s all kinds of credit out there, from revolving (credit cards) to installment (car and home loans.) Fair Isaac likes you to be well-rounded and sample them all. In short, diversity helps.

Benefits of Prelisting Home Inspections

Can I really obtain the home inspection in advance? The process seems to be useless since the prospective buyer gets the mortgage and then pays for his or her own inspection. It would seem like a good selling point if the property already had a clean inspection or the indicated repair were already taken care of. Michelle A.

You absolutely can and should obtain an inspection on your home before you put it on the market. Given the way mortgage lending guidelines have tightened up and the fact that appraisal and condition issues are killling a larger number of transactions, obtaining a prelisting inspection differentiate your home from the competition and boost your home's chances of selling by helping satisfy prospective buyers that the property will:

• Pass the lender's and appraiser's condition guidelines;
• Not have surprise condition issues arise during the sale process and escrow; and
• Be in a condition that reflects to the price they've agreed to pay for it.

Here are some things you should think about as you decide whether to move forward with obtaining prelisting inspections and figure out a plan around how to leverage the reports.

1. Prelisting inspections won't make the deal, but they can help optimize your chances of closing the deal. Buyers are not going to buy a house they wouldn't consider otherwise because it has reports, but if they are debating between your home and another property, a house with no issue, documentation that needed repairs have been completed, or even reports showing what needs doing and a corresponding discount can persusade buyers off the fence.

Many homes fall out of escrow because of condition issues not discovered until the transaction is underway. Sometimes, advance inspection reports can surface issues, allow you to get repairs completed and thus avoid that fatal  issue. However, at other times, prelisting inspections show issues too big for you to have repaired that will be deal-killers for almost any mortgage lender. In this case, you do yourself the favor of forgoing even bothering trying to get it past a mortgage lender and empower yourself to list it as a cash-only sale for a fixer-upper price.

2. Your prelisting inspection won't replace the buyer's inspections. To be clear, whatever inspection(s) you obtain won't be the inspection, it will just be an inspection. You don't want the buyer to rely totally on it and forgo his own due diligence for liability reasons; your aim is to either verify the place is in good shape, clear the place of major repairs or brief them on why the property is being priced in that way and what they'll need to do (or won't need to do) later, assuming you can negotiate an as-is offer.

But you also want the buyer to still obtain his own inspections, so he can attend, ask questions, select the inspector and not fault you for anything that is missed. And you should work with your listing agent to require that the buyer sign your written advice to get his own inspections, as well as to make the property available to the buyer for just that purpose.