Home affordability is at an all-time high as the value of housing drops to the point where a lot of people can afford home ownership.  According to USA Today, average mortgage rates for 15- and 30-year loans fell to their lowest rates in three weeks,

The 15-year mortgage, a popular option for refinancing, declined to 3.04%. That’s down from last week’s previous record of 3.05%.

Rates on 30-year loans have been below 4% since early December. But so far, those cheap rates haven’t been enough to ignite home sales.

While all of this is great news, the challenge remains being able to qualify for these wonderful loans!

It will take nearly four years to clear the shadow inventory of foreclosed (or nearly foreclosed) homes given the number that are delinquent, recently caught up, or bank-owned.  This can not be good news for a full housing recovery, but at least it’s a start.  From DS News.com,

To put the shadows into perspective, S&P says this latest number, which is based on the original balances of the loans, represents slightly less than one-third of the outstanding non-agency residential mortgage-backed securities (RMBS) market in the United States.

The New York City metropolitan statistical area (MSA) has the highest months-to-clear in the nation, at 202 months.

The good news is the rate in which shadow inventory is occurring has slowed.

When a home is foreclosed on, sold via short-sale, or a home owner receives a modification loan, the amount of money forgiven is taxable because it can be considered income (albeit unrealized).  That credit on your tax report can hurt to the tune of about $1500 to $3500 per $10,000.  Therefore if you lose your home to foreclosure and it as worth $150,000, you could conceivably owe $22,500 to $52,500 in taxes.

However through the Mortgage Debt Relief Act of 2007, this tax debt was forgiven for millions of people.  Unfortunately this is due to expire at the end of 2012 so could be big trouble for people already in financial trouble. According to DS News.com, it may be extended.

“Obama did include it in his budget, to extend it to 2014,” said Mark Luscombe, a principal analyst for tax research firm CCH, in a statement. “Congress….. might decide it’s not as crucial as extending the tax breaks that already expired at the end of last year.”

That doesn’t mean Congress won’t eventually act to extend the relief, Luscombe said.

If Congress acts, the tax relief could be extended to January 1, 2015.

Interest rates remain extremely affordable which is great news for buyers as the the housing market crawls into recovery mode. From MSNBC.com,

Mortgage buyer Freddie Mac said Thursday that the rate on the 30-year loan dropped to 3.88 percent this week, down from 3.9 percent. In February, the rate hit 3.87 percent, the lowest since long-term mortgages began in the 1950s.

The 30-year loan is the most common financing option for home buyers.

I know more and more people who are finally in the market to buy and are sure fortunate that they are getting these kinds of interest rates!

The feeling in the real estate industry is that the housing market is in recovery.  From web pages to newspapers, real estate agents and experts are heralding the fact that home sales are on the upswing.  Good news for sellers, agents, lenders, everyone!

The National Association of Realtors says,

Pending home sales increased in March and are well above a year ago, another signal the housing market is recovering. 

“The housing market has clearly turned the corner.  Rising sales are bringing down inventory and creating much more balanced conditions around the county, which means home prices will be rising in more areas as the year progresses,” said Lawrence Yun, NAR’s chief economist.

While other are predicting the second foreclosure wave, we will cling to the notion of a recovery until proven differently!

One of every three applicants for a mortgage are turned down by lenders, according to msn.realestate.com.  There is plenty of money available to loan and homes that are perfectly priced for affordability, but lenders are still saying “No thank you” to would-be buyers.

Banks and the federal government have tightened lending requirements. Each blames the other for the difficulties consumers have getting financing. It’s all a reaction to the big mortgage circus a few years back, when government regulators were lax, banks were handing out easy money and borrowers racked up debts they couldn’t pay.

The riskiest loans, made from 2004 to 2007, still haunt banks: The federal government now owns many of them and is forcing banks to buy some back.

Evidently when the government buys so many loans, their restrictions are greater so in order to sell lenders must meet those requirements.

Just like real estate agents are not fortune tellers, lenders are also not psychics.  While they do have a pretty good idea of someone’s payment history thanks to credit reports,they can not predict what a property will be worth in the future.  Any lender or realtor worth their weight will confirm that a house is only worth what it is worth now, today, this moment.

However, Zillow is predicting home values will continue to decrease according to Bryan of Loan Rates,

Zillow, a real estate listing website, estimates that home values are going to fall another 3.7 percent before the end of this year.  Considering how low some asking prices already are in the current market, another decline in average values means that it may actually be worth waiting to buy a new home.

While this might be good news for buyers, it could also confuse them when they think we are already at the bottom. The good news is that mortgage rates are expected to be steady at 4 percent for the next several months.

Although everyone acknowledges that a huge number of houses are not worth as much money that is owed on them, reducing the principal amount of loans for homes that are under water is proving to be a slow process.  One of the most significant delays is the resistance of Ed DeMarco of the Federal Housing Finance Agency.

According to CNN Money, DeMarco is not keen on this because reducing the amounts owed on homes would be too costly for Fannie Mae and Freddie Mac.

His primary worry is that providing principal forgiveness could prompt many of the 2 million borrowers who are current with their payments to fall behind. Having them default will hurt the housing market more than offering principal reduction will help it, he said.

“The far larger group of underwater borrowers who today have remained faithful to paying their mortgage obligations are the much greater contingent risk to housing markets and to taxpayers,” he said, adding these homeowners can lower their monthly payments through the government’s refinance program.

That’s fine and dandy for him to say, but for people who have legitimately suffered because of job loss or other economically triggered financial problems, he offers no solace.  Hopefully there will be some relief soon.

Many people face major financial trauma after losing jobs.  However, help is available from a number of sources if people opt to take advantage of the help available.  When someone experiences job loss through no fault of their own, a possible period of forbearance.

A friend of mine recently rode the modification roller coaster and was turned down. He turned to a HUD-approved financial planner and suddenly – with the authority given them by the power of the president – the ball is rolling again.   “Why wasn’t my client offered forbearance when you learned of the job loss? Are you familiar with what you are required to do by law?  Can you tell me where the citation is?”

For anyone not familiar with their mortgage right, especially if they have an FHA loan, read this from the NY Times,

Under the new rules, lenders are required to consider a forbearance plan among a number of options to prevent foreclosure. Most of the government programs intended to forestall or prevent foreclosure have not lived up to expectations, and many homeowners have lost their homes. Last year, foreclosures were filed against about two million properties, down from 2.9 million in 2010, according to RealtyTrac, a real estate data provider.

Seek a qualified financial counselor if you find yourself in trouble!

Credit requirements to qualify for home mortgages may be loosening, a signal that the housing market may also be on the mend after crashing in 2007.  Five years it’s been since the U.S. was riding high on the housing boom hog.  Don’t expect the housing market to improve to those levels anytime soon, but at least it is staggering back according to DS News.com,

Market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability. Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings. Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”

This is definitely welcome news for market watchers!