“We want consumers to avoid the marketplace’s silent pickpocket – discrimination,” said CFPB Director Richard Cordray.

“We cannot afford to tolerate practices, intentional or not, that unlawfully price out or cut off segments of the population from the credit markets,” he added.

As part of its effort, the bureau is educating consumers about their fair lending rights and it vowed to go after lenders who practice discrimination.

The Equal Credit Opportunity Act prohibits making credit decisions based on race, color, national origin, religion, sex, marital status, age, public assistance status or exercising rights granted under the Consumer Credit Protection Act.

“The CFPB is educating consumers about their fair lending rights and pursuing lenders whose practices are discriminatory,” Cordray said.

CFPB enforces fair credit rules associated with auto loans, credit cards, student loans, and mortgages, but mortgage and housing discrimination has been in the spotlight lately, as evidenced by the April report, “The Banks Are Back – Our Neighborhoods Are Not.”

Twice victimized

The National Fair Housing Alliance’s (NFHA) investigative report earlier this year found the same kind of discrimination that saddled minorities with unnecessarily burdensome loans during the housing boom, exists today in minority neighborhoods struggling with foreclosures.

The report found that REOs (for real estate owned by banks) in minority neighborhoods were substantially more likely to have maintenance problems and get less professional marketing, leaving festering eyesores in neighborhoods already victimized by abusive mortgages.

Shortly after the report, NFHA filed discrimination complaints with the U.S. Department of Housing and Urban Development (HUD) against Wells Fargo and U.S. Bancorp, both of which have denied the charges.

Wells Fargo, the nation’s fourth largest bank, disclosed in a securities filing this month that it could face civil charges from the U.S. Department of Justice under laws that prohibit discrimination against minority home buyers, but denied any wrong doing.

“On the basis of the troubling findings we observed in our recent investigation of the practices of some of the largest banks in the mortgage lending market, NFHA has filed two initial complaints,” said Morgan Williams, an attorney and NFHA’s fair housing enforcement and investigations director.

More could be ahead.

“We are continuing our investigation and speaking with other banks about making changes to their REO maintenance and marketing practices. NFHA is willing to work collaboratively with any bank to ensure that its REO maintenance and marketing practices comply with the Fair Housing Act,” Williams said.

The act prohibits discrimination concerning the sale, rental, and financing of housing based on race, religion, national origin, sex, (and as amended) handicap and family status.

Consumer Action action

Earlier this month, Consumer Action released it’s Housing Discrimination Survey of 549 community-based organizations (CBOs) serving people with disabilities, immigrants, families with children, and other underserved consumers.

CBOs reported housing discrimination remains a widespread problem in the United States, with the majority of CBOs reporting cases of refused opportunities to rent or buy housing.

• Seven out of 10 CBOs say that housing discrimination is a “very serious” or “somewhat serious” problem for the people they serve. Half of CBOs said housing discrimination is a “very serious” problem today.

• Four times more CBOs have “seen housing discrimination go up in the last two years” than those who reported a drop during the same period, by a margin of 40 percent to 11 percent.

• About two thirds, 65 percent of CBOs, said the level of awareness about housing discrimination rights among the individuals they serve is “somewhat low” or “very low.”

“Housing discrimination is all too alive and well in the United States today. In fact, the changing face of housing discrimination now tends to zero in more on immigrants, the disabled and families with children than in the past,” said Ken McEldowney, executive director of Consumer Action.

“The ever-shifting focus of housing discrimination makes it doubly hard to root out, since CBOs and other agencies concerned with the problem must constantly educate different segments of the population,” he added.

• CFPB offers a “Credit Discrimination Brochure” to help consumers root out and avoid credit discrimination.

• HUD offers a web page “Fair Housing – It’s Your Right,” offering a host of related information and assistance resources.

Of course, all those favorable affordability conditions don’t amount to a hill of beans if lenders remain tight fisted with mortgage money.

Can YOU afford to buy now?

However, in its first quarter 2012 report on metropolitan area home prices, the National Association of Realtors took a look at incomes and home prices, and found that qualifying incomes are well below median incomes in most of the nation, allowing many buyers, who can pass muster at the mortgage counter, to buy a home and stay well within their means.

“Historically favorable housing affordability conditions are making it easier for buyers to enter the market, despite the unnecessarily tight credit conditions,” said NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, FL.

To measure affordability, NAR examined incomes necessary to purchase a median-priced ($158,100), existing, single-family home, assuming down payments of 5 percent, 10 percent or 20 percent, and an interest rate of 4 percent, with 25 percent of gross income devoted to mortgage principal and interest.

The national median family income came in at $61,000 in the first quarter, but to purchase a home at the national median price, a buyer with 5 percent down only needed a $34,700 income. With a 10 percent down the buyer would need a $32,900 income and with 20 percent down, the income drops further, to $29,300.

In an example, NAR cited a buyer in Indianapolis, IN making a 10 percent down payment who would need an annual income of $24,000 to purchase a median-priced home. In Seattle it would be $55,300.

Keep in mind, while the average mortgage interest rate is hovering just below 4 percent some rates are lower still. Erate.com, which tracks a range of interest rates, reported rates on 30-year fixed-rate mortgages hovering around 3.6 percent for weeks.

Of course, such a rate is for prime borrowers with pristine credit and sky-high credit scores, but those borrowers can really cash in on affordability.

“For now, buyers are facing an extraordinarily advantageous situation if they can obtain a mortgage,” said Lawrence Yun, NAR chief economist.

For those who can buy now, things are looking good!

And there’s the rub. It is a big “if.”

First-time buyers, who can qualify for a mortgage, are taking affordability to the bank.

They accounted for 33 percent of homes purchased in the first quarter, up from 32 percent a year ago.

Investors also know an affordable deal when they see one.

NAR reported investors, drawn by bargain-basement prices, make up the bulk of cash purchasers, and accounted for 22 percent of all transactions in the first quarter, up from 19 percent in the fourth quarter and up from 21 percent a year ago.

The share of all-cash home purchases in the first quarter was 32 percent, up from 29 percent in the fourth quarter. All-cash deals accounted for 33 percent in the first quarter of 2011.

phanlop88 / FreeDigitalPhotos.net

Sen. Robert Menendez (D-NJ) and Sen. Barbara Boxer (D-CA) were scheduled to introduce legislation this week designed to remove barriers faced by refinancing homeowners with Fannie Mae and Freddie Mac loans.

The two legislators want to fast track the legislation to take advantage of today’s low interest rates.

The average interest rate on 30-year fixed rate mortgages (FRMs) hit another record low, 3.84 percent, the week ending May 3, according to Freddie Mac. During the same week, the average rate on the 15-year FRM was also a record low 3.07 percent.

The essence of the legislation already has President Obama’s support. This week, he gave Congress a “To Do” list that includes passing legislation that cuts the red tape in the mortgage market in order to expedite refinancing.

“I agree with President Obama’s ‘To Do” list to create jobs and strengthen our middle class” said Menendez. “That’s why I am introducing legislation this week to knock down barriers and help responsible homeowners refinance at lower rates. It will put thousands of dollars back in the pockets of hard working families and boost our economy. I look forward to moving this bill to our ‘done’ list quickly.”

Targeting shortcomings of HARP 2.0 (the enhanced version of the Home Affordable Refinance Program), the legislation, if passed into law, would:

• Extend streamlined refinancing for Fannie and Freddie borrowers.
• Eliminate all up-front fees on refinances.
• Eliminate appraisal costs for all borrowers.
• Require second lien holders who unreasonably block a refinance to pay restitution to taxpayers.
• Require mortgage insurers who unreasonably fail to transfer coverage to refinanced loans to pay restitution to taxpayers.
• Pay for itself. Reducing homeowners’ mortgage payments also reduces default rates and foreclosures, reducing Fannie’s and Freddie’s reliance on taxpayer bailouts.

After improvements six months ago designed to include millions of more homeowners, HARP 2.0 hasn’t been the resounding success supporters hoped it would be.

In it’s “Senior Loan Officer Opinion Survey on Bank Lending Practices” the Federal Reserve Board recently reported only 30 percent of senior loan officers from 58 domestic banks and 23 U.S. branches of foreign banks reported that they were actively soliciting HARP applications.

The officers cited mortgage insurance and second mortgage issues as top reasons many balked at doing HARP refinances. Strict underwriting standards, fraud, prohibitive costs for borrowers and conflicts between servicers have also gummed up the works.

“Under HARP, lenders looking to compete with a borrower’s existing servicer continue to face barriers to participating in the program, including stricter underwriting criteria and full representations and warranties,” Boxer wrote in a letter to Federal Housing Finance Agency (FHFA) acting director Edward DeMarco encouraging him to improve HARP further.

“As a result, many homeowners are being forced to refinance through their existing servicer, instead of being able to shop around for the best deal,” she added in a letter designed to garner quick support for additional upgrades to HARP.

HARP 2.0, available until Dec. 31, 2011, allows eligible homeowners with Fannie Mae or Freddie Mac mortgages to refinance to better terms and rates.

The borrower must have signed for the loan prior to June 1, 2009 and must be current on their mortgage payments with no late payments for the last six months, prior to applying. They also may have no more than one late payment in the last 12 months.

Homeowners can qualify no matter how far underwater they’ve become on their mortgage, that is, no matter how much more they owe on the mortgage balance than the home is worth.

The new legislation, if passed into law as it is, wouldn’t meet some of the goals rumored to be coming in the so-called HARP 3.0, including:

• Removing the Fannie Mae-, Freddie Mac-only barrier.
• Opening the program up to Ginnie Mae, Federal Housing Administration (FHA) and U.S. Department of Agriculture (USDA) mortgages.
• Opening the program up to riskier subprime mortgages and “Alt-A” loans.
• Allowing cash-out, jumbo loan refinances and refinances for loans held by self-employed people.
• Including borrowers behind on their payments more than once in 12 months or borrowers with a single late payment in the last six months.

Mortgage News Daily’s Robert Chrisman said his sources told him “(HARP 3.0) will allow conforming loans to be refinanced through FHA regardless of LTV or note holder.”

Children, however, have been the unseen victims of a lost home – until now.

“Housing disruptions due to foreclosure are just as traumatic for kids as losing their homes to a tornado or hurricane – except this disaster will hit one in ten children. Being forced from home affects children’s health, interrupts development, and hurts their chances of success in school,” said Bruce Lesley, president of First Focus, a bipartisan advocacy organization that believes children and families should be a priority in federal policy and budget decisions.

First Focus commissioned the Brookings Institution to generate “The Ongoing Impact of Foreclosures on Children,” which found 8 million children affected by foreclosure fallout.

The author, Brookings’ Julia Isaacs, said 2.3 million have already lost their owner-occupied homes. Another 3 million have been evicted, or may face eviction, from rental properties because of foreclosures. Three million more are at serious risk of losing their owner-occupied homes in the near future.

Foreclosures and children’s education

Families threatened with foreclosure often move out. Kids forced to switch schools often face staggered academic achievement – they have lower levels of math and reading achievement than those who don’t move.

Even after controlling for poverty and other family characteristics that are associated with residential mobility and poor academic performance, each move is associated with a reduction in math and reading scores by about one-tenth of a standard deviation — the equivalent of missing a month of school.

Subsequent moves have a compounding effect, each reducing scores by the same deviation.

Frequent changes in schools at both the elementary and high school level also is associated with higher rates of high school drop out.

The study surmises, dropping out may be due to a combination of academic and behavioral issues. The financial and psychological stress foreclosed families face affects the way parents parent and leads to harsher and less supportive parenting.

Isaacs says educators interviewed by the Governmental Accountability Office (GAO) reported concerns about kids’ social adjustment and the challenges that arise when schools must adjust the instruction pace to bring transferred kids up to snuff.

An adjusted instruction pace impacts not only transferred students, but also can have a negative effect on other students, because of teacher and school resources spent on high student turnover.

Foreclosures and children’s health

According to the report, foreclosures and housing instability also have a negative impact on physical and mental health in adults and kids feel it too.

Among foreclosed households, studies found higher rates of non-elective visits to emergency rooms and hospitals, as well as postponement of needed health care visits and necessary medications.

“Is the Foreclosure Crisis Making Us Sick?” by the National Bureau of Economic Research (NBER), the agency that tracks recessions, found:

• An increase of 100 foreclosed properties, caused visits to emergency rooms and hospital admissions for hypertension and diabetes to rise 7.2 percent and 8.1 percent, respectively.

• For every increase of 100 foreclosed properties, there was a 7.5 percent rise in health care visits for general malaise, including fever of unknown origin, abdominal pain and nausea.

• An increase of 100 foreclosures was associated with a 12 percent increase in visits for help with anxiety.

“Children are the often invisible victims of the foreclosure crisis. Foreclosure affects not just the homeowner or landlord, but also the children living in the foreclosed properties,” said Isaacs.

Renters? Cover your assets.

© dedMazay - Fotolia.com

Banks have done a less than stellar job at handling foreclosures and REO sales. The National Mortgage Settlement says so. Now they get a landlording job? Whew!

To help manage the mountain of distressed properties and supply the market with what could be more affordable housing, the Federal Reserve issued an updated policy statement to guide banks in renting out foreclosed properties they hold.

In a six-page, April 5 policy statement, the Fed said banks must typically make efforts to actively market and sell real estate owned (REO) properties, but given the tight housing and credit markets “banking organizations my rent residential properties (within statutory and regulatory holding-period limits) without having to demonstrate continuous active marketing of the property.”

The move is not unlike other federal agencies’ efforts to turn foreclosed properties into revenue generators.

The Federal Housing Finance Agency (FHFA), in conjunction with the U.S. Department of the Treasury and U.S. Department of Housing and Urban Development (HUD), has announced a”Real Estate Owned (REO) Initiative (ROI)” to unload an estimated 200,000 REOs held by Fannie Mae, Freddie Mac (GSEs or “Government Sponsored Enterprises”) and the Federal Housing Administration (FHA).

In the “Federal Reserve Policy Statement on Rental of Residential Other Real Estate Owned Properties” the Fed instructed banks to follow these and other guidelines:

• Use an operational framework to evaluate overall costs, benefits and risks of renting while taking into account property conditions, local market conditions for rental and owner-occupied housing, and the REO holder’s capacity to “safely and soundly” engage in rental activity.

• Consider clear and credible approaches for the ultimate disposition of the rental property, including seller-assisted financing and rent-to-own arrangements for tenants.

The Bank of America recently announced a pilot plan to allow homeowners at risk of foreclosure to hand over deeds and sign leases that will let them rent the houses back from the bank at a market rate.

• Banks that rent must do so in compliance with all applicable federal, state, and local laws and regulations, including: landlord-tenant laws; landlord licensing or registration requirements; property maintenance standards; eviction protections (such as under the Protecting Tenants at Foreclosure Act); protections under the Servicemembers Civil Relief Act; and anti-discrimination laws, including provisions of the Fair Housing Act and the Americans with Disabilities Act.

After a recent fair housing study the National Fair Housing Alliance, on April 10, filed discrimination charges over banks’ handling of foreclosed properties.

• Banks must also determine if rental activities are permitted under applicable laws and review homeowner and condominium association bylaws and local zoning laws for prohibitions against property rental. Third-party property managers should come with bank oversight to be sure they comply with these federal, state, and local laws.

• Banks with large inventories of what become rental properties should have a documented rental strategy, including formal policies and procedures for rental activities, and a documented, operational framework, down to the individual property level.

Policies and procedures should describe how the bank complies with local building codes; has adequate property insurance coverage; handles property taxes and other related obligations; and makes certain expenditures on improvements are appropriate for the property and the neighborhood.

The Fed said policies and procedures should also address risk management issues related to renting residential REO properties, including credit risk associated with tenants’ potential failure to make timely rent payments; vacancies, liability and the need for legal action against tenants for delinquency, including eviction.

Again, good luck with all that.

Pasquale Pappalardo and his wife, Lisa Tumminia-Pappalardo, among others, agreed to settlements with the Federal Trade Commission (FTC) that permanently ban them from telemarketing and engaging in timeshare resale services.

Timeshare markets heating up

The ban also comes with a $5.4 million judgment against the two and the south Florida-based Timeshare Mega Media and Marketing Group, Inc. after the operation netted $2.7 million in 20 months by defrauding thousands of consumers to the tune of about $2,000 each.

The operation charged consumers an up-front fee, allegedly a refundable amount toward the sale of a timeshare. Instead, clients received a contract to market and advertise their timeshare, which they mistakenly signed thinking it was a sales contract.

The company never had timeshare buyers lined up, never assisted anyone selling a timeshare and refused to refund money, before the FTC stepped in.

Bracing for more of the same, the FTC has updated a consumer alert, “Selling a Timeshare Through a Reseller: Contract Caveats.”

Initial timeshare sales are typically regulated through the real estate regulator in the state where the timeshare property is located.

A timeshare purchase is a purchase of an interval of time at a furnished resort, for an average of about $19,300, according to the American Resort Development Association (ARDA). Intervals are usually one week, but can be longer with “fractional” timeshares. Buyers also pay an annual maintenance and management fee (averaging $731) and may have access to an exchange service that allows them to trade times and places.

When it comes time to dump a timeshare, however, resales generally are not regulated.

This March, in Florida, home of one in four of all U.S. timeshares, Sunshine State legislators passed into law the “Timeshare Resale Accountability Act” to head off more fraud in the resale sector.

Also, last year, the ARDA launched the online “Timeshare Resale Resource Center” ahead of expected growth in sales this year.

The $4.63 billion in timeshare sales in 2010 was up 1.1 percent from 2009, according to ARDA, a far cry from the high of more than $10 billion in sales in 2007, but more growth is expected, according to ARDA.

The FTC said consumers looking to cash in on the growing market and resell their timeshare should question resellers – real estate brokers and agents who specialize in reselling timeshares.

Don’t assume you’ll recoup your purchase price for your timeshare, especially if you’ve owned it for less than five years and the location is less than well-known. To determine value, use a timeshare appraisal service licensed in the state where the service is located. Check the license with the state real estate regulator.

Beware of claims your timeshare market is “hot” with buyer demand, claims buyers are available and ready to buy and promises to sell your timeshare within a specific time.

The market is growing, but like the rest of the real estate market, it’s growing slowly and the target of scam artists.

The FTC also advises:

• Get everything in writing – the reseller’s marketing plan, plans to use a progress report, fees, refund policies, etc.

• Don’t agree to anything on the phone, online or otherwise until you’ve had a chance to check out the reseller. Contact the Better Business Bureau, your state Attorney General and local consumer protection agencies. Determine if any complaints are on file.

• Ask if the reseller’s agents are licensed to sell real estate where your timeshare is located. Verify their license with the state real estate regulator. Work only with licensed real estate brokers and agents. Seek references from family members, relatives, friends, co-workers or others you trust.

• Consider doing business with a reseller who takes his or her cut after your timeshare is sold. If you must pay a fee in advance, ask about refunds. Get refund policies and promises in writing.

• Before you sign on the dotted line of a reseller’s contract, get the details of all terms and conditions. It should include the services the reseller will perform; the fees, commissions, and other costs you must pay and when; whether you can rent or sell the timeshare on your own at the same time the reseller is trying to sell your unit; the length or term of the contract to sell your timeshare; and who is responsible for documenting and closing the sale.

Never sign a contract with blank spaces or a contract that doesn’t include the terms and conditions you desire. Shop around for other resellers.

Mobile apps like Realtor.com's are fast becoming the norm for house hunters

Instead, today’s unwired home shoppers are using mobile devices to do everything from browsing for housing via GPS to streaming videos of homes for sale.

Virtually all (98 percent) of home buyers who used a mobile device (smart phone or tablet) in their home search considered the device a valuable tool, with 46 percent asserting the device was “essential” and 52 percent stating it was “helpful,” according to a “Mobile Home Shoppers” study from The Real Estate Book, published by Network Communications, Inc. (NCI) a media company providing lead generation, advertising and Internet marketing services to the housing industry.

And, real estate agents? Get this. Home shoppers are not only searching for information on their mobile devices, but also taking action afterwards. Nearly seven in 10 (68 percent) of those who used a mobile device in the home search said they contacted a real estate professional to view a home based on their mobile search.

68 percent of app users have gone on to contact a realtor after a viewing a home on their mobile devices

“Our research supports that homebuyers are turning to their smart phones and tablets in their search and taking action to reach real estate professionals,” says Scott Dixon, president of NCI’s Real Estate Division.

But it’s not just home buyers.

A study of apartment renters from NCI’s Apartment Finder division yielded virtually the same results.

Mobile App Action

Mobile device users can go home seeking via the Internet, but they also use mobile “apps.”

Mobile apps (applications) are programs designed for smart phones and tablets or other handheld devices.

Typically net-connectable, apps are often dedicated to a specific task or group of related tasks, say, home shopping or mortgage shopping, neighborhood, crime and school reviews, as well as game playing, retail price comparing, GPS mapping, news and book reading, social networking, watching television shows and movies, making notes-to-self, pretty much anything you can do on a desktop or laptop computer.

Real estate apps typically incorporate GPS technology so consumers can locate the properties they are viewing, or else search for properties in their desired area.

Some real estate agent professionals in the know already have their own dedicated apps designed specifically for their operation – to highlight their listings, promote connectivity with clients and offer home shopping tools like mortgage calculators, price comparisons, neighborhood and school information, news and advice and other services.

Most national, regional and local real estate operations also offer apps.

“The time is now for agents and brokers to add mobile tools in their marketing mix to increase traffic and reach home shoppers right when they are actively engaged in their search process,” Dixon added.

Among buyers who used mobile apps:

• 78 percent viewed photos and videos of homes
• 66 percent inquired for more information about a listing
• 60 percent found listing details, price, description, amenities and contact information
• 57 percent located a house listing with GPS
• 55 percent searched by city
• 42 percent downloaded a home buying search app
• 30 percent shared listing information with friends and family

Among renters who used mobile apps:

• 72 percent viewed photos and videos of apartments
• 68 percent found details, price, description, amenities and contact information
• 59 percent searched by city
• 53 percent inquired for more information about an apartment community
• 45 percent located an apartment community with GPS
• 36 percent downloaded an apartment search app
• 24 percent shared listing information with friends and family

Mobile devices are a vital piece of the puzzle for both realtors and consumers © Sashkin - Fotolia.com

“What’s even more compelling about these survey findings, particularly for property managers and apartment communities, is that mobile users are not only browsing on their devices, but taking action to contact someone to view the listing,” said
Marcia Bollinger, president of Apartment Finder.

NCI’s research also indicates significant mobile use is yet to come – 85 percent of non-users said they’d consider using a mobile device in their next home search.

Investors, hand picking individual properties, working in groups, buying in bulk and smacking down all-cash deals like they won the Mega Millions Lottery, snatched up properties last year at an astounding pace, 64.5 percent greater in 2011 than 2010, according to the National Association of Realtors (NAR).

NAR’s 2012 Investment and Vacation Home Buyers Survey, covering existing- and new-home transactions in 2011, shows investment-home sales surged to 1.23 million last year from 749,000 in 2010 as investors with money bags absorbed distressed properties like a 3M sponge.

“During the past year, investors have been swooping into the market to take advantage of bargain home prices. Rising rental income easily beat cash sitting in banks as an added inducement. In addition, 41 percent of investment buyers purchased more than one property” said NAR Chief Economist Lawrence Yun.

They are also banking on low interest rates that could move to 5 percent before the year is out, according to some forecasts.

NAR said business is so brisk the feds should back off their “Real Estate Owned (REO) Initiative (ROI)” and let the market heal itself.

The Federal Housing Finance Agency (FHFA) initiative allows qualified investors to purchase pools of foreclosed, government-owned properties, provided they convert them to rentals or facilitate flips to owner-occupants.

“Small-time investors are helping the market heal since REO (bank real estate owned) inventory is not lingering for an extended period. Any government program to sell REO inventory in bulk to large institutional companies should be limited to small geographic areas. Even where alternatives are needed, it’s best to rely on the expertise of local businesses, nonprofit organizations and government,” Yun advised.

All-cash purchases were de rigueur in the investment market during recent years: 49 percent of investment buyers paid cash in 2011. Also, half of all investment home purchases in 2011 were distressed homes.

“Clearly we’re looking at investors with financial resources who see real estate as a good investment and who aren’t hesitant to use cash,” Yun said.

Investment buyers who had to finance their purchase with a mortgage in 2011 came up with a median 27 percent down payment.

NAR’s report also reveals investor pressure on the market is pushing up prices. The median investment-home price was $100,000 in 2011, up 6.4 percent from $94,000 in 2010.

Other NAR finds about investment buyers included:

• Investment-home buyers in 2011 had a median age of 50, earned $86,100 and bought a home that was relatively close to their primary residence – a median distance of 25 miles. However 30 percent of investment buyers’ purchases were more than 100 miles away, as they sought out bargain markets.

“The share of investment buyers who flipped property remained low in 2011, and many of those homes likely were renovated before reselling,” Yun said.

Only 5 percent of homes purchased by investors last year have already been resold, up from 2 percent in 2010. The typical investment buyer plans to hold the property for a median of 5 years, down from 10 years for buyers in 2010.

• Rather than a quick flip for profit, the desire for rental income drives most real estate investments. Half of investment buyers said they purchased primarily to generate rental income, and 34 percent wanted to diversify their investments or saw a good investment opportunity.

• Housing for education was another factor. NAR said 14 percent of investment buyers purchased the property for a family member, friend or relative to use. In many cases the home was intended for a son or daughter to use while attending school.

• The South rose again as the hottest investment market. Forty-four percent of investment properties were in the South, 23 percent in the West, 17 percent in the Midwest and 15 percent in the Northeast.

• Investment buyers aren’t cherry picking. Nearly half of investment buyers said they were likely to purchase another property within two years.

NAR’s survey, conducted in March 2012, includes answers from 2,241 usable responses about home purchases during 2011. The survey controlled for age and income, based on information from the larger 2011 NAR Profile of Home Buyers and Sellers, to limit any biases in the characteristics of respondents.

Say what??? Image by Timothy Valentine

The majority of Americans can only afford homes that cost less than $175,000 and nearly one in three can only afford something for $100,000 or less, according to the National Association of Home Builders’ (NAHB) “Priced-Out Effect” report.

During the housing crash, many markets did see home prices slashed by as much as 50 percent in some of the hardest hit areas, especially when foreclosed and other distressed properties were tossed into the mix. Unfortunately, household incomes tanked too.

Unemployment and under-employment have really taken a toll on the American home-buying psyche, unfortunately, at a time when home prices are relatively low and interest rates are at all-time lows.

The NAHB’s Priced-Out study translates U.S. Census Bureau-American Community Survey household income data into the distribution of homes that U.S. households can afford homes in various price ranges.

The model estimates how many households can qualify for a new home mortgage before and after a house price increase. The resulting difference is the number of priced out households.

Displayed as a pyramid of affordability, with less-expensive homes at the base, the model reveals a crowded base where a large number of households have relatively modest incomes. As the price of a home goes up, the pyramid narrows, climbing with fewer and fewer households in each tier able to afford higher priced homes.

NAHB Pyramid

Based on conventional assumptions and underwriting standards that included a 10 percent down payment, it takes an income of about $26,430 to purchase a $100,000 home, according to the NAHB.

In 2012, about 28.9 million households in the U.S. are estimated to have incomes lower than that threshold and, therefore, can only afford to buy homes priced under $100,000.

Of the remaining 87.5 million who can afford a home priced at $100,000, 23.3 million can only afford to pay a top price of somewhere between $100,000 and $175,000.

Together, those who can afford housing priced at or below $175,000 make up nearly 52 percent of all households.

Toss in the $175,000 to $250,000 bracket, add the additional 18 percent of households who can afford that bracket and affordability for homes at $250,000 and below amounts to nearly 70 percent of households.

At the peak of the pyramid, where the 1 Percenters live, only 2 percent of households can afford to buy. Of course, the 99 Percenters could care less.

NAHB’s pyramid could be only the tip of the iceberg.

John Burns Consulting reported this week, if you’ve been following lagging home price trends reported by the National Association of Realtors, Federal Housing Finance Agency (FHFA), S&P/Case-Shiller and others (including NAHB’s pyramid), if you are trying to monitor affordability with those reports, you might as well be on board the Titanic.

Burns Home Value Index

The “Burns Home Index” reveals home prices have been rising for three months in 90 of the 97 markets they track. Other studies show price improvements only in the last month.

Burns says the average price increase over the past three months has been 1.1 percent, an unexpected 4.5 percent annual rate.

“This is big news, so why isn’t anyone else reporting it? It is because most price indexes are at least 3 months behind what’s happening with home prices right now,” says Burns’ blogger Wayne Yamano.

__________________________________________________

Life saver? Who knows?

Nearly 73 percent of a group of Americans said they’d never heard of the two primary programs in the Obama Administration’s Making Home Affordable initiative – the Home Affordable Modification Program (HAMP) and the Home Affordable Refinance Program (HARP) – according to a survey by Survey Sampling International.

Recently updated to help additional millions of homeowners, the federal programs help make housing more affordable through mortgage modifications and special refinanced home loans, in both cases to bring down the cost of housing and help avoid foreclosure.

The study also found a large majority of those surveyed, more than 62 percent, unaware of new government programs that make home buying more affordable.

Since the housing crash, to make home buying more affordable, the federal government has cranked out a host of programs.

The Federal Housing Finance Administration (FHFA), the Federal Housing Administration (FHA), the Office of Veterans Affairs (VA), and even the U.S. Department of Agriculture’s (USDA) Rural Development program have all offered new or updated affordable home buying programs.

Rob Wyse, the spokesman for FreeScore.Com, which commissioned the survey, said the results could have been different if all those polled were homeowners or home buyers.

Wyse said the home ownership status of those surveyed is not known. Home ownership status was not a qualifying factor for the 300 Americans polled. Aged 18 to 65, they were randomly selected after they opted in to sit on the panel.

“If I did this study again, the first question I’d ask is ‘Are you in the market for a home.’ It’s like buying a car. You aren’t really aware of what’s in a car unless you are ready to buy a car,” Wyse said.

“A lot of people go shopping for homes and they don’t know their credit scores,” he added.

What is ‘HAMP,’ ‘HARP?’

• Available through Dec. 31, 2013, HAMP offers mortgage modifications for qualified homeowners with first and second mortgages and for qualified investors.

A mortgage modification occurs when the lender reworks the terms of an existing home loan, typically to lower payments and make the home more affordable. To get the payment down, mortgage modification lenders lower the interest rate, extend the loan term, reduce the principal or use any combination of those approaches.

• Also available through 2013, HARP allows qualifying homeowners to refinance Fannie Mae or Freddie Mac home loans to lower rates even if they owe more than the home is worth.

A refinance trades in an old mortgage for a new one and that can be a good deal with today’s lower rates. CoreLogic estimates more than 22 percent of homeowners nationwide are “underwater” owing more than their property is worth due, in part, to fast declining real estate values during the crash and buyers who over-leveraged their home buying deal before the crash.

HAMP, HARP under-exposed, poorly deployed

Barbara Lymberis, president of the Santa Clara County (CA) Association of Realtors (SCCAOR), isn’t so sure survey numbers are that far off.

Some critics of the post-crash government housing programs is that they weren’t sufficiently publicized.

“There has not been enough intent or effort to ‘get the word out’ in clear, simple, effective communications, either on the part of the government or on the part of the lending institutions,” said Lymberis, with the Perfect Harmony Properties Team at Keller Williams in Campbell, CA.

Others complain the programs’ are voluntary, giving lenders little incentive. Recent updates are designed to change that, but Mark Hicks, broker/owner of the Seabrooke Group in San Jose, CA isn’t convinced.

“If you asked a real estate agent what HAMP is they will tell you it’s a place where you got dropped into a black hole until they foreclose on your property. It is filled with flaws the main one being that the banks do not want to help the people no matter what,” said Hicks.

He added, “The HARP program has so many caveats that this is the one that is the main issue for owners of underwater homes. The borrower must be current on the mortgage at the time of the refinance, with a good payment history in the past 12 months. If they could afford the payments would they be behind?”