Not many new listings (Charleston, Myrtle Beach: best cities, credit score, loan)

[scjj]

I believe there are steep fines and penalties to refinance an ARM loan, not to mention a lot of them probably wouldn't be able to qualify. They bought homes they couldn't afford to begin with.

[charlottePA]

Originally Posted by stosh

Read today's paper especially the headline where you see the '47% decline'
Also, listings don't mean anything and are nothing but smoke and mirrors.

A hypothesis is an educated guess....the key word being 'educated.'
You may want to sit with USCJoe and watch that 60 Minutes piece together. Then explain to the rest of us your interpretation of what was presented.

Never, ever participate in a gunfight armed only with a knife....

Can't find the 47% story on the paper on-line. Do you have a link?

I repeat my assertion that any national story is certainly frightening, but proceed with caution. Numbers from California, Nevada, Michigan don't apply to Charleston. I don't know if the market in Charleston will lag and mimic what's happened in Sunbelt cities like Las Vegas. Based on the data I can access specific to the Carolinas, I still maintain we're better positioned that other areas of the country that make the headlines.

[Flat2MT]

Originally Posted by charlottePA

Can't find the 47% story on the paper on-line. Do you have a link?

I repeat my assertion that any national story is certainly frightening, but proceed with caution. Numbers from California, Nevada, Michigan don't apply to Charleston. I don't know if the market in Charleston will lag and mimic what's happened in Sunbelt cities like Las Vegas. Based on the data I can access specific to the Carolinas, I still maintain we're better positioned that other areas of the country that make the headlines.

It was in yesterday's paper, in the Business Section insert, pg 2 where RE sales are down 46% from same period last year. That's significant.

You need to remember that what is happening out west started a lot sooner than here so there's a lag in other areas feeling the same pain, albeit the level of intensity may vary.

Can you explain why the numbers from CA, MI, NV don't apply to Charleston? What empirical facts support this statement?

[c99]

Here is the link to the Post and Courier article about home sales being down 46%: Charleston, SC Latest Business News: Local home sales down 46% from November '07

I, too, have noticed that there appears to be a lag, but do not have any empirical evidence to support my observations.

I have heard that line over, and over, and over ... about how the CA, FL, and NV real estate market principles do not apply to Charleston. The reasons I've heard (all from realtors) are that Charleston's economy is 'too diverse' (medical, port, professional jobs, retirement destination, etc.) to experience a severe housing decline.

I have not seen, and no one has offered empirical evidence; however. I would enjoy seeing sound logic and evidence as to why market dynamics are not going to affect Charleston. Maybe that is not possible due to the unusual wild cards in the mix. It's anyone's guess how these non-natural market forces (i.e. bailouts, stimulus packages, adjusting of mortgage rates) will affect the housing market and economy in general now and in the future.

[USCJoe]

In talking to a very experienced mortgage broker with years of experience she advised that there is no penalty or prepayment penalty with an ARM. She also advised that if a home owner holds an ARM that they have gotten the past few years that with the current interest rates there would be little if any rise in the monthly payment/interest when their rate reset. Certainly there may be a percentage of home owners who may not qualify to refinance but I would have no idea as to the percentage.

[USCJoe]

Originally Posted by c99

Here is the link to the Post and Courier article about home sales being down 46%: Charleston, SC Latest Business News: Local home sales down 46% from November '07

I, too, have noticed that there appears to be a lag, but do not have any empirical evidence to support my observations.

I have heard that line over, and over, and over ... about how the CA, FL, and NV real estate market principles do not apply to Charleston. The reasons I've heard (all from realtors) are that Charleston's economy is 'too diverse' (medical, port, professional jobs, retirement destination, etc.) to experience a severe housing decline.

I have not seen, and no one has offered empirical evidence; however. I would enjoy seeing sound logic and evidence as to why market dynamics are not going to affect Charleston. Maybe that is not possible due to the unusual wild cards in the mix. It's anyone's guess how these non-natural market forces (i.e. bailouts, stimulus packages, adjusting of mortgage rates) will affect the housing market and economy in general now and in the future.

I agree that Charleston's diverse economy and the profile of it's residents may very well soften the local effects of the downturn of the economy, financial markets and national housing market more so than in some other parts of the country. I also agree that it is anyone's guess how the "unnatural market forces will affect the housing market and economy in general now and in the future." For this reason, unlike some others,I have tried to temper my evaluation of the local housing market and the extent to which home prices will drop in the future and when we will see a bottom.

[USCJoe]

Originally Posted by Flat2MT

It was in yesterday's paper, in the Business Section insert, pg 2 where RE sales are down 46% from same period last year. That's significant.

You need to remember that what is happening out west started a lot sooner than here so there's a lag in other areas feeling the same pain, albeit the level of intensity may vary.

Can you explain why the numbers from CA, MI, NV don't apply to Charleston? What empirical facts support this statement?

It is interesting to note that even though the number of homes sold in November 08 compared to the same period last year fell 46%, the medium sales price only fell 7%. This figure certainly appears to be some evidence that home prices in the Charleston area have held up quite well over the past year. Certainly no where near the percentage figures tossed out by some forum members.

[scjj]

Refinancing Adjustable-Rate Loans Becomes Harder for Borrowers - WSJ.com

With rates on many homeowners' adjustable-rate mortgages rising, some who would like to refinance into a new loan are finding they can't.

In some cases, that is because their loan carries a prepayment penalty, which would force them to come up with thousands of dollars if they refinance in the first few years. Such penalties are common with so-called option adjustable-rate mortgages, which typically carry a low teaser rate that rises sharply after an introductory period.

Other borrowers are getting caught short by a changing housing market -- one in which home prices have flattened and lenders are beginning to tighten their standards after a long period of making mortgages easier and easier to get. The challenges are greatest for homeowners whose credit has declined since they took out their last loan and for those who have little if any equity. Some of these borrowers are still able to refinance but are finding it more costly than they expected.

These new challenges come at a time when many borrowers who took out adjustable-rate mortgages are facing higher payments. There are about $1.1 trillion to $1.5 trillion in ARMs that will face rate increases this year, according to the Mortgage Bankers Association. The MBA expects borrowers to refinance as much as $700 billion of those mortgages.

"The decrease in property values, combined with prepayment penalties, is making it very challenging for people to get out of these loans," says Ed Shanks, an executive vice president with U.S. Bank Home Mortgage, a unit of U.S. Bancorp. U.S. Bank is seeing more loans fall through, particularly in markets such as Arizona, California, Colorado and Ohio, where home values have softened. It could be "the tip of the iceberg," Mr. Shanks says.

In recent years, many homeowners refinanced repeatedly -- to get a better rate, lower their payment, consolidate debt or pull out cash. Even now, mortgage rates remain relatively attractive, though they have moved up from their recent lows in early December, and most borrowers still should be able to take advantage of them. The challenges for homeowners could increase if lenders continue to tighten standards and the housing market remains soft.

Antonio Papa, a construction worker, took out an option ARM with a 1% introductory rate in 2005 on a second home he owns in Jupiter, Fla. The rate jumped to 5.6% in September 2005 and has since climbed to 7.5%. "I was looking to refinance to have more stability," he says. He has decided to hold off because his option ARM carries a prepayment penalty that would force him to pay six months' of interest if he refinances within the first three years. Mortgage brokers often receive higher payouts for putting borrowers into a loan with a prepayment penalty, says Sandra Barrett, a loan officer in Palm Beach Gardens, Fla., who was working with Mr. Papa.

Prepayment penalties are most common with option ARMs and loans made to borrowers with scuffed credit. Some 84% of option ARM loans made last year carried a prepayment penalty, according to an analysis by UBS AG that looked at mortgages that were packaged into securities and sold to investors.

The challenges facing borrowers are becoming more apparent at a time when opportunities for refinancing are narrowing. Rates on 30-year fixed-rate mortgages dropped to their lowest levels in 14 months in December, but have recently drifted higher. Rates on 30-year fixed-rate loans currently average 6.45%, according to HSH Associates in Pompton Plains, N.J., up from 6.16% in early December.

"The best deals in going from an ARM to a fixed-rate are passing," says Doug Duncan, chief economist at the Mortgage Bankers Association. "If anything, rates are likely to move up rather than down."

Meanwhile, there are signs that some lenders are beginning to tighten their standards. The shift comes after a long period of liberal lending practices that made it easy for borrowers to finance 100% of a home's value or get a mortgage without documenting their income and assets.

In a survey released Monday by the Federal Reserve Board, roughly 15% of domestic banks reported that they had tightened credit standards on residential mortgage loans in the past three months, the highest share since the early 1990s.

This month, Wells Fargo & Co. will begin reducing by 5% the maximum amount it will lend to certain riskier borrowers in "declining" markets. Those markets, covering more than 150 counties in two dozen states, include parts of California, Florida, Michigan and Ohio.

The change "reflects the tighter requirements of our investors," a Wells spokesman says. "I think all lenders are experiencing this kind of tightening of credit standards." Investors who buy mortgage-backed securities have been growing more concerned about credit quality as defaults have increased.

CitiMortgage, a unit of Citigroup Inc., last month began requiring that borrowers who take out a "stated-income" loan sign an affidavit attesting to the fact that information about their income in the application is accurate and hasn't been modified by their mortgage broker or loan officer. The change is designed "to protect the borrower as well as the lender," because borrowers may have trouble repaying the loan if their income is overstated, a company spokesman says.

On Jan. 30, Fannie Mae, the government-sponsored mortgage finance company, tightened its standards for so-called interest-only loans, which let borrowers pay interest and no principal in the loan's early years.

Other homeowners are being flummoxed by lower appraisals. Those most likely to be affected bought a home or refinanced in the past year or two and have little, if any, equity. "The block to refinancing is mainly located in those areas of the U.S. where there is little or no appreciation," says Peter Lansing, a mortgage banker in Denver.

Michelle Thompson, a medical-claims associate in North Glenn, Colo., pulled out $30,000 when she refinanced her mortgage last year, boosting her loan to $183,000. She would like to refinance again in order to lower her monthly payment, but when she went to apply for a new loan, she discovered that her mortgage debt exceeded the home's value.

Some borrowers are trying novel strategies. Charlotte Keyes, a program/project manager in Shawnee, Kan., refinanced her mortgage two years ago, pulling out $32,000 to consolidate her debt. With the rate on her loan set to rise to roughly 10%, Ms. Keyes is looking to refinance. Because she owes more than the home is worth, she plans on taking out a $13,000 auto loan and using the funds to pay down her mortgage.

With ARMs, "the tag line you always hear...is you can refinance with no problem," says A.W. Pickel, a mortgage banker with LeaderOne Financial Corp. in Overland Park, Kan., who is working with Ms. Keyes. "But it is a problem." The appraisal for Ms. Keyes's last loan was inflated, he adds.

Mitch Ohlbaum, a mortgage broker in Los Angeles, says some of his customers have had to tap the equity on their primary homes in order to pay down a portion of the debt on an investment property and be approved for a refinancing. Other borrowers have had to take a mortgage with a higher interest rate because their high debt load makes them a less attractive borrower.

Some borrowers facing prepayment penalties are sitting on the sidelines for now. David Lorentz, a high-school teacher in San Francisco, recently tried to refinance the option ARM on a four-unit apartment building he owns as an investment. He wanted to pull out cash to pay for renovations and college tuition for his children, but found he would have to pay an $18,000 prepayment penalty. "I guess I didn't get a good loan," says Mr. Lorentz, who plans to refinance in August when the penalty period expires.

[charlottePA]

Originally Posted by Flat2MT

It was in yesterday's paper, in the Business Section insert, pg 2 where RE sales are down 46% from same period last year. That's significant.

You need to remember that what is happening out west started a lot sooner than here so there's a lag in other areas feeling the same pain, albeit the level of intensity may vary.

Can you explain why the numbers from CA, MI, NV don't apply to Charleston? What empirical facts support this statement?

Michigan's a slam dunk: heavily industrialized economy, a lot of wagon-wheel type industry seeing the natural end of it's competativeness vis-a-vis foreign competition resulting in a much higher unemployment than the nation for the past decade. And emmigration from the state in general. Not really the same dynamics in SC.

Now, you've got a better point with CA and NV. CA was a unique speculative market that experienced an enormous bubble. We saw some of that in CHS, but I think it'd be hard to argue it was to the extent of say Stockton, CA, or such. Ergo, the crash in CA was naturally harder. NV had the same speculative bubble, I'm thinking specifically Clark County which had enormous population growth and housing starts in the late 90s. You've caught me flat-footed without specific numbers, but their out there.

Look, I'm all for a crash in values in CHS. It means I can come in and buy steals. I've been looking for steals for a year and haven't found many to meet my standards. When and if it happens, count on me to be one to help the homeowner out of their McMansion and into a mobile home.

[USCJoe]

Originally Posted by scjj

Refinancing Adjustable-Rate Loans Becomes Harder for Borrowers - WSJ.com

With rates on many homeowners' adjustable-rate mortgages rising, some who would like to refinance into a new loan are finding they can't.

In some cases, that is because their loan carries a prepayment penalty, which would force them to come up with thousands of dollars if they refinance in the first few years. Such penalties are common with so-called option adjustable-rate mortgages, which typically carry a low teaser rate that rises sharply after an introductory period.

Other borrowers are getting caught short by a changing housing market -- one in which home prices have flattened and lenders are beginning to tighten their standards after a long period of making mortgages easier and easier to get. The challenges are greatest for homeowners whose credit has declined since they took out their last loan and for those who have little if any equity. Some of these borrowers are still able to refinance but are finding it more costly than they expected.

These new challenges come at a time when many borrowers who took out adjustable-rate mortgages are facing higher payments. There are about $1.1 trillion to $1.5 trillion in ARMs that will face rate increases this year, according to the Mortgage Bankers Association. The MBA expects borrowers to refinance as much as $700 billion of those mortgages.

"The decrease in property values, combined with prepayment penalties, is making it very challenging for people to get out of these loans," says Ed Shanks, an executive vice president with U.S. Bank Home Mortgage, a unit of U.S. Bancorp. U.S. Bank is seeing more loans fall through, particularly in markets such as Arizona, California, Colorado and Ohio, where home values have softened. It could be "the tip of the iceberg," Mr. Shanks says.

In recent years, many homeowners refinanced repeatedly -- to get a better rate, lower their payment, consolidate debt or pull out cash. Even now, mortgage rates remain relatively attractive, though they have moved up from their recent lows in early December, and most borrowers still should be able to take advantage of them. The challenges for homeowners could increase if lenders continue to tighten standards and the housing market remains soft.

Antonio Papa, a construction worker, took out an option ARM with a 1% introductory rate in 2005 on a second home he owns in Jupiter, Fla. The rate jumped to 5.6% in September 2005 and has since climbed to 7.5%. "I was looking to refinance to have more stability," he says. He has decided to hold off because his option ARM carries a prepayment penalty that would force him to pay six months' of interest if he refinances within the first three years. Mortgage brokers often receive higher payouts for putting borrowers into a loan with a prepayment penalty, says Sandra Barrett, a loan officer in Palm Beach Gardens, Fla., who was working with Mr. Papa.

Prepayment penalties are most common with option ARMs and loans made to borrowers with scuffed credit. Some 84% of option ARM loans made last year carried a prepayment penalty, according to an analysis by UBS AG that looked at mortgages that were packaged into securities and sold to investors.

The challenges facing borrowers are becoming more apparent at a time when opportunities for refinancing are narrowing. Rates on 30-year fixed-rate mortgages dropped to their lowest levels in 14 months in December, but have recently drifted higher. Rates on 30-year fixed-rate loans currently average 6.45%, according to HSH Associates in Pompton Plains, N.J., up from 6.16% in early December.

"The best deals in going from an ARM to a fixed-rate are passing," says Doug Duncan, chief economist at the Mortgage Bankers Association. "If anything, rates are likely to move up rather than down."

Meanwhile, there are signs that some lenders are beginning to tighten their standards. The shift comes after a long period of liberal lending practices that made it easy for borrowers to finance 100% of a home's value or get a mortgage without documenting their income and assets.

In a survey released Monday by the Federal Reserve Board, roughly 15% of domestic banks reported that they had tightened credit standards on residential mortgage loans in the past three months, the highest share since the early 1990s.

This month, Wells Fargo & Co. will begin reducing by 5% the maximum amount it will lend to certain riskier borrowers in "declining" markets. Those markets, covering more than 150 counties in two dozen states, include parts of California, Florida, Michigan and Ohio.

The change "reflects the tighter requirements of our investors," a Wells spokesman says. "I think all lenders are experiencing this kind of tightening of credit standards." Investors who buy mortgage-backed securities have been growing more concerned about credit quality as defaults have increased.

CitiMortgage, a unit of Citigroup Inc., last month began requiring that borrowers who take out a "stated-income" loan sign an affidavit attesting to the fact that information about their income in the application is accurate and hasn't been modified by their mortgage broker or loan officer. The change is designed "to protect the borrower as well as the lender," because borrowers may have trouble repaying the loan if their income is overstated, a company spokesman says.

On Jan. 30, Fannie Mae, the government-sponsored mortgage finance company, tightened its standards for so-called interest-only loans, which let borrowers pay interest and no principal in the loan's early years.

Other homeowners are being flummoxed by lower appraisals. Those most likely to be affected bought a home or refinanced in the past year or two and have little, if any, equity. "The block to refinancing is mainly located in those areas of the U.S. where there is little or no appreciation," says Peter Lansing, a mortgage banker in Denver.

Michelle Thompson, a medical-claims associate in North Glenn, Colo., pulled out $30,000 when she refinanced her mortgage last year, boosting her loan to $183,000. She would like to refinance again in order to lower her monthly payment, but when she went to apply for a new loan, she discovered that her mortgage debt exceeded the home's value.

Some borrowers are trying novel strategies. Charlotte Keyes, a program/project manager in Shawnee, Kan., refinanced her mortgage two years ago, pulling out $32,000 to consolidate her debt. With the rate on her loan set to rise to roughly 10%, Ms. Keyes is looking to refinance. Because she owes more than the home is worth, she plans on taking out a $13,000 auto loan and using the funds to pay down her mortgage.

With ARMs, "the tag line you always hear...is you can refinance with no problem," says A.W. Pickel, a mortgage banker with LeaderOne Financial Corp. in Overland Park, Kan., who is working with Ms. Keyes. "But it is a problem." The appraisal for Ms. Keyes's last loan was inflated, he adds.

Mitch Ohlbaum, a mortgage broker in Los Angeles, says some of his customers have had to tap the equity on their primary homes in order to pay down a portion of the debt on an investment property and be approved for a refinancing. Other borrowers have had to take a mortgage with a higher interest rate because their high debt load makes them a less attractive borrower.

Some borrowers facing prepayment penalties are sitting on the sidelines for now. David Lorentz, a high-school teacher in San Francisco, recently tried to refinance the option ARM on a four-unit apartment building he owns as an investment. He wanted to pull out cash to pay for renovations and college tuition for his children, but found he would have to pay an $18,000 prepayment penalty. "I guess I didn't get a good loan," says Mr. Lorentz, who plans to refinance in August when the penalty period expires.

Interesting article and with the comment that the analysis made that 84% of option arms made last year carried a prepayment penalty I recontacted the mortgage broker who has been in business for 35 years. She stated that her comment with regards to prepayment penalties and arms related to "A" paper loans, those made to borrowers with credit scores of about 550 and above. She noted that prepayment penalties are allowed on "B" paper,ie.Credit scores below about 550. She added that prepayment penalties are not allowed on VA or FHA loans and would be amazed that of all option arms made that 84% would carry a prepayment penalty. Maybe some mortgage brokers on this forum could enlighten us with regards to the use of option arms with prepayment penalties in the Charleston area. The mortgage broker stated that she can only remember being involved in 2 option arms with prepayment penalties in her 35 years of being in the business, but did note that she generallyu has handled "A" paper rather than "B" paper. Of the 14 years that I have been in business in the Charleston area, I have never to my recollection had a closing in which a party to the transaction had a mortgage that carried a prepayment penalty. I apologise for communicating that no option arms carry a prepayment penalty, but from experience I don't think that the Charleston area housing market and prices will be affected in a negative way by option arms that carry a prepayment penalty. Maybe some local mortgage brokers can offer their opinion.