Inside Real Estate News » June

FHA loans almost 50 percent of loans in Denver

John Rebchook — Tue, 04 Aug 2009 17:15:52 +0000

Government-insured FHA loans accounted for 47.5 percent the financing for all of the homes closed in the Denver area in June, reports San Diego-based DataQuick.

To get a perspective on this, I turned to Peter Lansing, president of Universal Lending, and a sponsor of InsideRealEstateNews.com.

Universal Lending probably does more FHA-insured loans than any other lender in the Denver area. Even during the go-go days of so-called liar loans, subprime loans, and alt-A loans – remember those? – Lansing stuck to his knitting and stayed away from toxic loan products, which is one reason I jumped at the chance when he offered to sponsor my blog.

While I was on the phone with Peter, he looked up his loan volume for July. He did not have June figures broken out.

He found that 79 percent of his loans last month were for buyers, not refinances, which I’m thinking will be the subject of a future blog.

And he found that 75.4 percent of his loans were FHA-insured, and 4.8 percent were VA loans. So 80.2 percent of his loans were government-backed. Year-to-date, 65.6 percent were FHA loans and 9.9 percent were VA loans.

A couple of years ago, of course, everyone was getting a conventional loan. They were easy to qualify for, and they were less expensive than FHA-insured loans.

Lansing noted that Brian Chappelle, principal of Potomac Partners in Washington, D.C. said that Alt-A loans constituted 10 percent of Fannie Mae’s portfolio, but more than 40 percent of its losses. And while the average FICO score of the Alt-A borrower was 722, the default rate was so high because lenders did not have to verify their income and other metrics to make sure they are good borrowing prospects.

Part of the reason that FHA-insured loans are so popular, of course, is that it is lower-priced homes that are selling.

“That sounds like good data,” said Lou Barnes, principal of Boulder West Financial Services, when I told him about the DataQuick report. Nationally, a couple of years ago, when conventional loans were so easy to get, FHA-insured loans accounted for only 10 percent of all loan. "That is what everybody tells me, not just in Colorado, but everywhere, the lower-priced ranges are doing well."

Barnes said a friend in Bakersfield, Calif., told him that foreclosures are priced so below-market that “it is triggering bidding frenzies.”

But Barnes said it isn’t so much that buyers are hankering for FHA-insured loans, is rather it is almost the only lending game in town.

“To put FHA in context, other loans have disappeared,” Barnes said.

And, as best as he can tell, Fannie Mae and Freddie Mac are using the most stringent qualifications for lenders than ever in their history. They have the most stringent underwriting since he started in the business in 1978, and from what he has been able to ascertain from family members and others with a long history in the lending business, they have never been so tight with lending before.

I asked Lansing if he thought it was a good thing that people are turning toward FHA-insured loans.

“My answer to that is as long as you are using good credit analyis and lending with good lending practices, which means looking at four basic areas every time – down payments, good credit and good job history, money left over for emergencies, and good cash flow, meaning what percentage of gross earnings you’re spending on housing - whether is is an FHA loan or a conventional loan, is not important.”

Contact John Rebchook at JRCHOOK@gmail.com

May-to-June foreclosures not encouraging

John Rebchook — Tue, 14 Jul 2009 10:31:19 +0000

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When crunching numbers, I’m always a bit wary of putting too much weight on consecutive month data when it comes to real estate.

That is because there can be huge seasonal reasons why home sales, for example, might pop in March from February, or fizzle in September from August, for example.

But any data can serve a purpose as far as trying to divine trends.

As I reported in other posts, the number of foreclosure filings in the Denver-area has fallen 10.5 percent in the first half of this year, from the same period last year.

But if you look from May to June, the picture is not as pretty. It is darn right ugly, in fact.

In the seven-county area, there were 1,845 new foreclosure filings in June, a 15.5 percent increase from May.

And while every county showed an increase on a month-to-month basis, the changes were all over the map.

Boulder County, for example, showed slightly less than a 1 percent increase, while Broomfield, showed a 42.86 percent increases. But as always is the case with Broomfield, the numbers are so small that the percentage change, up or down, is not significant.

For the biggest counties, the percentage increases for the consecutive months are: Adams and Denver, 9.6 percent each; Douglas, 33.16 percent; and Jefferson, 26 percent.

In this case, I don’t think the May to June increase involves seasonal changes as it does that banks and other lenders no longer have the self-imposed moratoriums on foreclosures. This is definitely a trend to continue to watch.

Foreclosures down, not out

John Rebchook — Tue, 14 Jul 2009 10:29:06 +0000

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It may be the bottom of the Denver-area housing market, but it is too early to say that the foreclosure crisis is over.

There were 10,726 foreclosure filings in the metro Denver area in the first half of the year, a 10.5 percent decline from the 11,992 the first six months of 2008.

“That is still a big number,” noted Ryan McMaken, spokesman of the Colorado Division of Housing, when I shared the numbers with him.

But beyond that, changes in the state law late last year and bank moratoriums on foreclosure filings last fall, played a role in the drop in foreclosures.

“There is no obvious trend right now,” McMaken said. It may not be until the third-quarter numbers are available that it is clear where we stand in the foreclosure cycle.

One of the big factors that helped drive down foreclosures this year were lenders voluntarily not pursuing foreclosures, starting last fall, and into the spring of this year, said Carol Snyder, public trustee for Adams County.

“The major, big-boy lenders had a self-imposed moratoriums on filings, starting around Thanksgiving of last year,” Snyder said. “That led to a huge drop.”

But starting in about April, attorneys began to send more foreclosure filings to her office, she said.

Overall, Adams County saw a 11.6 percent drop in the first six months of the year compared to the same period last year. But from April 2008 to April 2009, Adams County saw a 14.98 percent increase in foreclosures, and from June 2008 to June 2009, it saw a 9.6 percent drop. But from May 2008 to May 2009, there was a big lull, with new foreclosure filings dropping by 22.5 percent.

And from May to June, foreclosures rose by 21.6 percent in Adams County.

Inside Real Estate News » June

FHA loans almost 50 percent of loans in Denver

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